The Long-Term Goal Behind Gazprom's Power Play

Gazprom and the Russian government strong-armed Shell out of one of the world's largest natural gas projects, and now it appears that BP is next on their hit list. Geoffrey Styles looks at the end game:

Just as Russia was traditionally a continental power, capable of asserting influence across the entire Eurasian land mass, but with limited sea power, Gazprom's market and influence is currently limited to where its pipelines can reach. The natural gas market will become increasingly globalized in the years ahead, with the expected rapid expansion of LNG trade. Without the ability to supply gas across the oceans, Gazprom would miss out on much of the growth in this market, especially in the US, where LNG is still in its infancy. That could be very costly, particularly if Europe turns elsewhere for the gas it will need to meet its commitments under the Kyoto Treaty.

The ultimate roots of Gazprom's LNG strategy--and thus its actions with regard to Sakhalin-2--lie in the inherent contradictions of the US gas market, where environmental regulation has simultaneously nurtured the growth of gas demand, while stifling its domestic supply from federal lands and offshore drilling. If I were running the world's largest natural gas company, I would not rest until I was properly positioned to participate in what is likely to be the world's largest market for LNG. Shell and its partners just happen to be in the unfortunate position of providing both the means for achieving that end, and an obstacle in its way.

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