Russia's extensive reserves of conventional gas mean shale production is not yet a viable option.
The decision to boost energy co-operation was taken by RussianPresident Vladimir Putin and British Prime Minister David Cameron at a recent meeting.
London wants to find new sources of raw materials, while Moscow wants to increase sales in Europe.
Despite the lack of ready-built pipelines, Gazprom is already involved in the UK market. Gazprom Marketing and Trading already sells gas there although the fuel it trades is not from Siberia.
The company acquires gas through swap deals, and the expansion of its customer base in Britain is making the idea of running a separate gas pipeline to the British Isles a viable option.
Gazprom has been accused of sleeping through the global shale revolution but production in Russia is simply not profitable. “It’s out of the question for at least 20 years,” says the director of the Russian National Energy Security Fund, Konstantin Simonov.
Russia has plenty of conventional gas, and a more pressing matter is the development of oil fields in Eastern Siberia and the Arctic, he believes. BP says Russia’s resources could last for 73.5 years at the 2011 rate of production.
There is also a lack of market structure for shale, with few independent producers.
Estimates put the cost of “blue fuel” production in Russia at $30-$50 per thousand cubic metres. The problem is the lack of government will to rein in the monopolists.
The domestic price of gas far exceeds the prime cost – around $120 per thousand cubic metres. That is still below the cost of production of shale gas in the US.
Rising gas prices are causing discontent. This summer, the price of gas for private consumers is set to rise by 15pc, which is almost double the rate of inflation.
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