The EIA's "Magical" Projections for Gazprom

This is a big week for energy nerds.

The Energy Information Administration (part of the U.S. Government's Department of Energy) released its Annual “International Energy Outlook.” Very boring stuff, until you look under the hood…especially at the bits about Gazprom. According to the EIA:

"Developing new sources of natural gas is a priority for Gazprom [false], given that production at its three largest fields (Yamburg, Urengoy, and Medvezh’ye) is in decline [true]. There is concern that the global economic recession may reduce both domestic and export demand for natural gas in the short run and dampen investment in Russia’s natural gas sector [very true]. In the IEO2009 reference case, however, investment delays are not expected to hinder the growth of Russian supplies."

And why is that? Not explained.

As a result, the EIA has magically increased Gazprom’s future production capacity when calculating the amount of gas available to Europe in the future. And all without Gazprom having to invest a single kopek in new production. Fancy that.

But it gets better.

In order to back up its claim, the EIA sources a January 2009 report by Global Insight (European Natural Gas Supply and Demand Report). This is a lazy dodge, since Global Insight (like everyone else, including the IEA) stress that "Heavy investments will be needed to replace the two super-giant fields currently underpinning [Russian] supplies."

Since the Global Insight report was released, however, Gazprom has once again cut its investment budget in new production. If the company is committed to increasing its investments in new production, why then does it continue to slash the investment budget?

[Crickets...]

The EIA could do a better job in its analysis.