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Russia's Gazprom reappoints chief Alexei Miller for further five years


Will ensure continuity at world's biggest gas exporter

Gazprom sales to pipeline markets fell 8% in 2020

Looking increasingly to China, LNG for growth

  • Author
  • Stuart Elliott    Rosemary Griffin
  • Editor
  • Jonathan Loades-Carter
  • Commodity
  • Natural Gas

London — Russian gas giant Gazprom has reappointed Alexei Miller as the head of the group for a new five-year term from May 31, ensuring business continuity at the world's biggest gas exporter.

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Miller, a close ally of Russian President Vladimir Putin, has been head of Gazprom since 2001.

"The board of directors made a unanimous decision to elect Miller as chairman of the management committee from May 31, 2021, for a five-year term," Gazprom said in a short statement.

Miller has overseen the management of Gazprom through major shifts in its core European market and numerous disputes over the past two decades, including its pricing and transit spats with Ukraine and contract renegotiations with key European buyers.

He has also managed Gazprom's more recent pivot toward supplying new markets such as China and a planned expansion in LNG.

There has been repeated speculation over the years that Miller could be removed and replaced with someone more inclined to reform and improve efficiency at the company, but his reappointment is a further signal of the Kremlin's intent on gas policy.

"This clearly means the continuation of the status quo," George Voloshin, head of the Paris branch of Aperio Intelligence, told S&P Global Platts.

"In addition to the lack of change in Gazprom's business model and operational profile, its negotiating and supply strategy vis-a-vis foreign buyers will very likely be the same as before," Voloshin said.

SOVA Capital analyst Mitch Jennings added that with Miller "a known entity" the reappointment was neutral from both an operational and negotiating perspective.

Chinese pivot

Gazprom continues to view Europe as a core market, and hopes to complete the controversial Nord Stream 2 gas pipeline to Germany soon.

"In my view, during Miller's next term Gazprom will remain fixated on completing Nord Stream 2 in order to reduce Ukrainian gas transit to a minimum," Voloshin said.

Gazprom is also eying increased pipeline sales to China to secure export growth.

It began pipeline exports to China for the first time via the 38 Bcm/year Power of Siberia pipeline in December 2019 and in its first full year of operation in 2020 supplied 4.1 Bcm.

Gazprom said in June last year it was considering increasing the capacity of the pipeline by 6 Bcm/year from its current design capacity to 44 Bcm/year.

It has also said there is the potential for Russian pipeline gas export capacity to China to reach more than 130 Bcm/year in the future with the addition of other routes.

Gazprom produced a total of 452 Bcm of gas in 2020, down by some 10% on the 500 Bcm produced in 2019.

Miller said in December that Gazprom's production capacity exceeded annual production by almost 100 Bcm, which implies a current output capacity of around 550 Bcm/year.

Gazprom saw its total gas sales outside Russia dip by 8.1% in 2020 to 209.7 Bcm as the coronavirus pandemic hit demand -- particularly in the second quarter.

Exports to the key markets of the Far Abroad -- Europe plus Turkey minus the countries of the former Soviet Union -- totaled 175 Bcm, but are expected to increase to 183 Bcm in 2021.

Gazprom posted its highest ever supply volume to the Far Abroad in 2018 when it sold 201 Bcm.

LNG expansion

Gazprom is also looking to expand its LNG production capacity and is building a new 13 million mt/year LNG export facility at Ust-Luga in northwest Russia to add to its 10.8 million mt/year Sakhalin LNG facility.

There are currently only two operational LNG facilities in Russia -- Sakhalin LNG and the 16.5 million mt/year Novatek-operated Yamal LNG facility whose first train became operational in 2017. Both plants can operate at above technical capacity, giving Russia a total LNG production capacity of closer to 30 million mt/year.

Russian Deputy Prime Minister Alexander Novak, speaking earlier Feb. 24 during a Gas Exporting Countries Forum (GECF) webinar, said Russia planned to increase its total LNG production capacity to 120-140 million mt/year by 2035.