Miller Predicts Oil at $250 Next Year

ReutersMiller speaking to reporters in Deauville, France, on Tuesday. He laid out Gazprom's strategy for the next few years.
Gazprom CEO Alexei Miller said Tuesday that he expected oil prices to top $250 per barrel next year, a figure considerably higher than most industry forecasts.

Speaking to reporters in Deauville, France, Miller laid out the gas giant's strategy for the next few years, promising to invest $30 billion by December and significantly more afterward.

He also accused the European Union of jeopardizing energy security through what he called "protectionist" policies.

"The [oil] price is reaching new highs. We expect it near $250 per barrel in the foreseeable future," Miller said. The figure referred to 2009, Gazprom officials later clarified.

Miller blamed speculation for much of the recent rises in oil prices, which neared a record $140 per barrel last week, and said gas prices — which lag oil prices by six to nine months — would witness similar increases on the back of rising demand. Earlier predictions that gas prices would reach $400 per thousand cubic meters by the end of 2008 have already been surpassed, he said.

But analysts suspected that Miller was talking up the oil price deliberately in an effort to put pressure on Gazprom customers. Gazprom is trying to put "pressure on buyers to emphasize that … they must pay high gas prices in the future," said Valery Nesterov, an energy analyst at Troika Dialog, which has a forecast of $100 per barrel for 2009.

Gazprom, the world's third-largest company by market capitalization with a stock market value of more than $330 billion, hopes to emerge as the largest company worldwide within seven to 10 years with a market cap of $1 trillion, Miller said in his speech, a copy of which was obtained by The Moscow Times.

It is a bold ambition, one that Gazprom has outlined before and that Nesterov said was probably wishful thinking, given potential antipathy toward the company's expansion in certain markets, particularly Europe.

"If the company gets too ambitious, it might see some political opposition," Nesterov said.

Miller said the EU's best guarantee to securing stable energy supplies is through cooperation and not by putting up barriers to investment, particularly with its "anti-Gazprom clause."

The anti-Gazprom clause refers to the third energy package on the single energy market proposed by the EU's Slovenian presidency but does not discriminate against the monopoly, said a spokesman for the EU delegation to Russia. The spokesman, Denis Daniilidis, said there was "some good news" in this package for Gazprom relating to the eased unbundling of energy companies in the electricity and gas markets. "It will not affect Gazprom's prospects on European markets," he said.

Europe depends on Russia for about one-quarter of its natural gas supplies and has sought to diversify its supply base to secure its energy supplies. Gazprom, which would like to provide more gas to Europe, said it was equally dependent on Europe and that it was senseless to diversify for the sake of it.

"If you diversify suppliers, it will not solve the problem," Alexander Medvedev, Gazprom's deputy CEO, said at the news conference.

He insisted that the company's ambitions to expand in Europe were not politically motivated. "Why would we invest money to create the possibility of shutting off the gas supply?" he said.