Gazprom Board Sees Shale Gas Production as 'Unreasonable' Prospect

MOSCOW - Russia's natural gas monopoly OAO Gazprom said Tuesday its board considers shale gas production an "unreasonable" prospect, merely a week after President Vladimir Putin urged the national energy giant to retune its strategy to adapt to changing market conditions.

"Currently shale gas production is considered to be unreasonable [for the company] due to high reserves of traditional gas, which has lower production costs than shale gas, and due to ecological risks", Gazprom said in a statement, citing the company's board.

The board of the company, Gazprom said, will look again at the state of the global shale gas production in a year.

Gazprom supplies about a quarter of Europe's gas demand through a pipeline network, but this is under competitive pressure from growing supplies of liquefied natural gas, which is imported to Europe by ship from places like Qatar. The economic crisis and growing supplies of shale gas and LNG have contributed to a sharp drop in gas prices, challenging Gazprom's business.

Countries from Poland and Ukraine to China are starting to develop their own shale-gas reserves, posing an even bigger threat to Gazprom's exports.

Mr. Putin urged Gazprom Oct. 23 to "take into account the current developments and have a clear view how the situation will develop not only in the next two to three years, but through the next decade," he said, adding that the country's energy strategy should be ready in November.

Copyright (c) 2012 Dow Jones & Company, Inc.


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Jed Maitland-Carter | Nov. 2, 2012
There are three factors: 1.Yes, shale gas is more expensive on a straight comparison of dry gas production but there could be Natural Gas Liquids (NGLS) in the shale gas production which are not present in the traditional gas, hence the return on the shale gas could be higher if NGLs are included and the higher well/frac cost could be justified, so waiting to explore and produce could be a mistake. 2.The frac technology may come down in price ( to extract shale gas/oil), so waiting makes sense. 3. I believe Russian energy companies should be taking E & P positions in the USA to at least be in the game: with the higher well and frac costs of shale gas/oil production it would be money well spent to get first hand Eagleford/ Bakken know how that could be implemented when the climate is right in Eurasia.

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