As the dispute over Gazprom's pipeline gas export monopoly intensifies, one of the largest "independent" gas producers in Russia -- state-controlled Rosneft -- continues to raise its output.
Last week saw a slew of pronouncements about the Gazprom monopoly, with some pointing to a possible Gazprom-Rosneft deal on future gas exports and others insisting the legislation on the issue was not subject to change.
While the debate rages on, Rosneft is quietly boosting production.
In the first quarter, output rose by 6% year on year to 16.7 Bcm, enough to meet all of Belgium's annual gas demand.
Rosneft sells all of its gas -- both dry and associated gas -- on the domestic market where prices are lower than the more lucrative export market.
In recent years it has sealed a number of sales contracts with local consumers -- so much so in fact that its supply obligations now surpass its production.
In Q1 the company's gas sales were 17.8 Bcm, 1.9 Bcm higher than the same period of 2015, and 1.1 Bcm higher than its own output.
"The volume growth was due to supplies under new long-term contracts," Rosneft said.
It said it "fully complies" with its contract obligations to supply gas to its consumers, using a variety of options for optimizing its portfolio and balancing "uneven gas consumption." These include: purchasing gas generated by processing the company's associated gas at third-party gas processing plants; and buying and selling gas from third parties, including on the St Petersburg exchange.
"This practice allows us to optimize the gas transportation routes and, consequently, increase the efficiency of sales," it said.
Rosneft said it continues to participate in trading on the exchange as a seller of gas, with 0.7 Bcm sold in Q1.
EXPORT DEBATE
Rosneft and leading independent gas producer Novatek have been lobbying Moscow to allow them to export gas by pipeline having already secured a concession to export LNG.
A move toward lifting the ban seems to be gathering pace, with the Federal Anti-monopoly Service (FAS) last week saying it would be in favor of a liberalization of the pipeline export sector.
There was also talk of a behind-the-scenes deal between Gazprom and Rosneft where the former could sell the latter's gas in Europe under an agency agreement, something Gazprom later denied.
Another rumor was that Russia would allow Rosneft gas to help fill the planned Power of Siberia pipeline to China.
So far, though, the official line from the Kremlin is that no changes are being considered.
Deputy Prime Minister Arkady Dvorkovich said last week that there were no plans to change the regulations on pipeline gas exports.
BP, which holds a stake in Rosneft, is hopeful the export market will be opened up.
BP's head of Russia and CIS economics, Vladimir Drebentsov, said at the Flame conference in Amsterdam last week he saw momentum on the issue.
"Russia is becoming more market-oriented," Drebentsov said.
BP could stand to benefit from any regulatory change, not least that it could work to market Rosneft gas in Europe or even Asia in the future.
The pressure is only likely to mount on the Kremlin to liberalize.
"Rosneft and Novatek are aggressive in their push to pressure the government to allow pipeline exports," Tatiana Mitrova, head of oil and gas at the RAS' Energy Research Institute, said at Flame.
"This pressure will only increase," she said.
