The Washington Post is reporting on a U.S. press tour this week by Gazprom’s Alexander Medvedev, capped off by a friendly hockey game between a Gazprom sponsored team and former NHL stars from the Boston Bruins. According to a Bruins press release, “The Boston Bruins Alumni will play Gazprom Export during Gazprom’s 2006 winter tour with proceeds benefiting The Boston Bruins Charitable Foundation. The Friendship Cup will spotlight Gazprom Export’s efforts in the global energy market with four teams featuring both Olympians and NHL Hall of Famers.” The Post article goes on to report that Gazprom is undertaking an aggressive effort to improve their image in the United States, especially in Houston, where they maintain an office to drum up investment opportunities – some of Gazprom’s largest shareholders are emerging market mutual funds. According to Gazprom’s entrepreneurial acumen, purchasing Pravda is a good business decision! The Post reports:
“We are not an instrument of policy because it cannot comply with our commercial structure,” Medvedev said in an interview yesterday. But ever since a contract dispute with Ukraine led to a cutoff of Russian gas exports on New Year’s Day, Europeans who rely heavily on Russian gas have worried about security of supply. Russia, meanwhile, has argued that Gazprom needs to expand into the European and U.S. distribution business to assure Russia of “security of demand.” Many experts say that Gazprom is unwieldy and poorly run and will have trouble meeting gas delivery obligations regardless of the politics of supply. Vladimir Milov, president of the Institute of Energy Policy in Moscow and former deputy energy minister, said yesterday that Gazprom had spent $18 billion in the past three years on acquisitions outside the gas sector, more than it has spent in the past decade to increase gas production. … When Gazprom does invest, it often does so inefficiently. Much of the company’s recent spending has gone to building new pipelines and repairing aging ones. Yet one study Milov quoted said that every mile of new pipeline built by Gazprom costs two to three times as much as those built in the rest of the world. Gazprom’s Medvedev defended the company’s non-gas ventures, calling the newspaper it bought, Pravda, a “pure commercial decision” and not a tactic for controlling public opinion. He said many of the non-energy ventures were being managed by Gazprombank.
During the hockey + Harvard Business School press tour, Medvedev also did an interview with Forbes:
So why did Statoil, for instance, express surprise? [in regards to Shtokman] The market is changing. It’s inevitable. Also, you should not take everything for granted what everyone is telling you. I can imagine the level of disappointment, that they were so close. But due to the change in the market, we have reconsidered. To us, the discount rate for Russia is substantially higher than the discount rate for Libya or African reserves. It’s not fair. At the same time the announcement was made, it appeared to many that Russian energy companies were attempting to push aside Western companies doing business in Russia, particularly in Sakhalin. I believe these allegations are not fair. In Sakhalin, we have been in negotiation with Shell. We signed an agreement with them. The next day, we saw a doubling of the capital costs and operational costs. Second, we saw that 50% of the ecological requirements had not been fulfilled, and some of them were very serious. It seems there is a wide gap between your view of Gazprom and the conventional wisdom. What do you do to close that gap? We appreciate we could do a better job in this respect, meeting with the media and the investment community. We are making progress on that. My presence here is part of that. What I don’t like is just to be in a defensive position. We should have a regular communication channel.
Last week, the National Public Radio affiliate in Houston, KUHF, broadcast an interview with me addressing some concerns regarding Gazprom’s Houston presence. Click the link and it is possible to listen to the interviews.