You're reading: Putin: Russia has to meet challenge of shale revolution

MOSCOW - The Russian energy sector must meet the challenge of the shale revolution, Prime Minister Vladimir Putin said in the State Duma.

"We have to be ready for any external shocks. The likelihood of them recurring is, as you know, high," he said in a report on the government’s activity. The world has entered an era of turbulence, and there’s also a new wave of technological changes. The configuration of the global markets is altering," he said.

Deputies said in questions prior to the speech that the United States was, for example, actively developing the technology to produce shale gas. "How do we intend to respond to this?" Liberal Democratic Party members asked.

"This could of course redefine the hydrocarbons market in a big way. Russian energy companies have to be ready right now to meet this challenge," he said.

"I totally agree with the deputies when they say we have to have a better long-term macroeconomic, financial, technological and defense forecasting system in place. This all the more important because the 21st century promises to become an era of new geopolitical centers – financial-political and cultural-civilizational ones," he said.

"The last four years have brought the oil and gas of Vankor and Talakan, new fields on the Yamal and in Yakutia and Sakhalin into our national coffers. Work has begun in the Caspian and on the Arctic shelf. The first stage of the Eastern Siberia-Pacific Ocean (ESPO) pipeline has been built, and we are supplying to the Asia-Pacific region, which is a very efficient and rapidly growing region of the world. A new sort of crude has emerged. Last year we even entered the European gas market directly, by launching Nord Stream, a gas pipeline under the Baltic Sea. Once the USSR disintegrated we were trapped by a succession of intermediaries and transiters. The South Stream pipeline should start to be laid as early as the end of this year," he said.

This is not the first time Putin has commented on shale gas. He first mentioned it 18 months ago, the thrust of his argument being that Gazprom needed to become more efficient in response to heightening competition.

The boom in production of non-traditional gas, above all shale gas, has brought gas prices on the American market and covered the country’s gas needs in full. Once the U.S. stopped importing gas, gas from new LNG projects started to be shipped to Europe and brought prices down there, too. American gas producers are already exporting their gas and now an economy that was supposed to be the main consumer of Russian LNG has itself started to compete with Gazprom on markets like Japan, India and China.

Natural gas at the main U.S. trading floor, Henry Hub, currently trades at $1.98 per MMBtu, which is approximately 2,100 per cubic meters. In Russia, gas is cheaper only in the regions that produce it, the Yamal-Nenets and Khanty-Mansiisk autonomous districts.