Tuesday 31 May 2016 2:09 pm

Russia’s Gazprom moves to quash Saudi-style gas price war speculation

Russian export monopoly Gazprom has moved to quash speculation that it could start a price war in the European gas market.

Analysts, industry experts and commentators have argued Russia, which supplies about a third of Europe's gas via pipelines, could cut its prices in response to higher cost US liquefied natural gas shipments. Such a move would make the latter less economic, helping Gazprom defend its market share.

It follows a similar logic to the Saudi-led Opec strategy of maintaining oil output despite low prices, pricing higher cost US shale gas competitors out of the market.

Read more: Russia and the UK have lowest effective corporate tax rate

But Gazprom deputy head Alexander Medvedev said today: "We don't see any need to wage a pricing war." He added that gas prices in the second quarter would be the lowest this year but would rise from the third quarter onwards.

Earlier this year, the first US shale gas shipment sailed into European waters. US natural gas exports are expect to hit 60m tonnes per year in 2019, and European countries could use this to push back against Russia's rising market dominance.

"There has been a lot of talk that LNG from the United States is a panacea (for those looking to switch away) from Russian gas… but at the moment there are more preferable destinations for US LNG than Europe," Medvedev added.

Read more: US-style shale revolution could soon slash gas prices in Britain

"Price will determine the competitiveness of US LNG. I don't see US LNG flowing to Poland or Portugal."

Medvedev also said that Gazprom's exports to the EU and Turkey may exceed a record-high 165bn cubic meters per year, topping deliveries of 159 bcm in 2015.

He also expects sales to Europe to reach $28bn (£19bn) this year.