Alexey Miller's column

On the gas market liberalization

“Gazprom proposes to abolish natural gas pricing regulation for industrial consumers starting from the next year.”

“Our proposal is to use commodity trading mechanisms starting from 2006 in order to set the gas supply prices for industrial consumers, and to keep regulated prices exclusively for the housing & utilities sector, state & local budget consumers and the population.

Natural gas is currently the only primary resource, which price regulation is based on historical indicators and is not set by the demand and supply levels. As a result, the gas industry has long been a powerful financial donor for the entire economy, including profitable export-oriented consumers supplied with cheap natural gas.

Natural gas share in Russia’s energy balance has risen to 50 per cent, even to 80 per cent in some regions, and there is a considerable decline in coal, fuel oil and other fuel alternatives utilization. Therefore, there is a slowdown in the development of the corresponding industries on which our country’s energy security also relies.

The proposal to abolish gas pricing regulation may seem to be quite a radical step, but a shift to market relationships in the gas industry should not be equal to an uncontrollable gas prices increase. Gazprom has definitely a dominating position in the gas market, but the independent producers and alternative fuel suppliers, including coal and fuel oil, will compete with us under equal economic conditions.”