Russia's Gazprom, the supplier of a quarter of Europe's natural gas, expects the price of crude oil to almost double as the decade draws to a close, taking gas prices with it.
“We think it will reach $250/bbl in the foreseeable future,” Chief Executive Alexei Miller told reporters at a presentation in France. Officials said the prediction was for 2009.
Alexander Medvedev, deputy CEO of Russia's dominant gas group, said gas prices for Europe would rise to reflect the cost of crude.
Europe's gas prices are mainly based on long term contracts and tied to price of crude. The comments came as the oil price sat at around $134 a barrel, a few dollars short of last week's record level.
Gazprom, already the world's largest gas producer with a stock market value of over $330 billion, expects to triple in size to become a $1 trillion company within seven to 10 years.
It will be investing heavily to that effect, with total investments estimated at $30 billion for 2008 and set to rise in the years after that, company officials said. Medvedev sought to allay concerns that the company's European investments might be politically motivated, and said EU efforts to diversify its gas supplies would not solve anything.
“Why should we invest money to create the possibility to shut off the gas supply,” he said at the presentation in the resort town of Deauville in northern France.
Gazprom sells the EU around a quarter of its gas and wants to raise this to around a third. Brussels has sought to diversify supplies to avoid over reliance on Russia and improve the security of energy supplies.
“If you diversify suppliers, it will not solve the problem,” Medvedev said.
He also said Gazprom will only consider investing in Russian oil major TNK-BP after shareholders BP Plc and a group of Russian billionaires have settled a dispute over ownership.
Industry sources say Gazprom is interested in buying control of TNK-BP, where the world's third-largest non-government controlled oil company by market value, BP, is locked in battle with its Russian oligarch partners over control of the joint venture.
Earlier, Miller told a French newspaper that by 2020, Gazprom sees about half of its gas production coming from new fields in arctic seas, Yamal peninsula in Western Siberia and the Far East.
By then (2020), about half of gas production will come from new fields on the continental shelf of arctic seas and from the Yamal peninsula in Western Siberia and the Far East,” he told Le Figaro newspaper.
The Russian gas producer also said it aimed to become a major player in France and targeted corporate customers.
Miller said Gazprom did “not exclude” making major acquisitions in France but organic growth was the priority for now.
The company has indicated it would like to buy more gas pipelines and storage facilities across the continent and some EU politicians fear the gas giant's westward expansion will allow the Kremlin to exert more control over Europe's energy markets. (Reuters)