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Threat of gas crisis looms over Russia

Production will fall nearly 4 billion cubic metres short of domestic and export demands next year if urgent steps are not taken, reports Fred Weir.

india Updated: Nov 14, 2006 19:37 IST
Fred Weir
Fred Weir

Russia, which has pledged to supply world markets with energy, faces a production crunch and looming gas shortages at home, according to a Kremlin report leaked to the media.

Russian natural gas production will fall nearly 4 billion cubic metres short of domestic and export demands next year if urgent measures are not taken, according to the report, prepared by the Industry and Energy Ministry for President Vladimir Putin, and published in the Russian daily Vremya Novostei.

The shortfall will grow to almost 30 billion cubic metres by 2010, and nearly 50 billion cubic metres by 2015, it says.

Russia, which has a quarter of the world's gas reserves, produces about 700 billion cubic metres of the fuel each year.

But domestic use of the gas, which is heavily subsidised by the state, has been growing rapidly as Russia recovers from its post-Soviet economic slump.

"The deficit is caused by an excess of cheap gas," Sergei Kupriyanov, an official of Gazprom, the state owned gas monopoly, told Vremya Novostei.

"As long as coal and fuel oil are two or three times as expensive as gas, companies will use the latter as fuel, no matter how much is supplied," he said.

At the same time Gazprom, has been expanding its exports to Europe, China and even the United States.

The report calls for urgent investments of $300-billion to ramp up Gazprom's production, repair pipelines and modernize its infrastructure.

It also suggests higher domestic prices for gas, to encourage Russian homes and industries to use the fuel more economically.

Russia has already moved to end subsidies to neighbouring erstwhile Soviet countries. It has hiked the price considerably for gas shipped to Ukraine, Georgian, Latvia and Moldova, which will come into effect from next year.

First Published: Nov 14, 2006 19:14 IST