Cheaper LNG Forces Russia to Cut Prices for Pipeline Gas

01 August 2016: At mid-year, Russia, Europe’s biggest gas supplier, expects exports to its top consuming region to reach a total of 165 Bcm in 2016, topping its all-time high of 162 Bcm in 2013 as it seeks to maintain its market share in the face of renewed pressure from Europe’s established and new LNG suppliers. But in its bid to retain its dominant position, Russia is enduring significant cuts to its gas exports prices. The country’s single biggest customer, Germany, increased its imports in the first quarter by around 1 Bcm year on year to about 26.4 Bcm, but its payments were down 50%, averaging around $4.70/MMBtu compared with about $9.40 in the first quarter of 2015. A significant portion of the decline is due to the gas being taxed differently by the Russian government. Between January 1, 2013, and December 31, 2014, taxes added an average of around $4.20 to the final price; between January 1, 2015, and March 31, 2016, this figure averaged about $1.80. In the first quarter of this year, it added just 75c to the final price, equal to a 5% export tax, compared with 30% last year. Please fill out form to view article.