Gazprom to sell gas to exporters at unregulated prices

11 January 2018 Week 01 Issue 501

The Russian government has allowed Gazprom to sell natural gas to LNG exporters at unregulated prices from January 1, 2018. The move is seen as a move to counter growing competition from the US for global LNG markets.

Gazprom has one operating LNG export facility, the Sakhalin-2 plant in the Far East, where production capacity is 9.6 million tpy. The plant came into operation in 2009.

Earlier this month, the first shipment of Yamal LNG, a private venture between Novatek (51%), Total (20%), China National Petroleum Corp. (CNPC, 20%) and China’s Silk Road Fund (9.9%) was delivered to Europe, from where it is expected to be moved to an Asia buyer.

Yamal LNG’s capacity will reach 16.5 million tpy when all of its three trains are operational by end-2019.

As natural gas is a vital export for the Russian economy, Moscow is keen to keep pace with the LNG industry and challenge new players in what it sees as its traditional markets, particularly Europe, which is seen as a prime a target for US exporters.

It is currently investing heavily in pipelines to Europe via the NordStream project, Turkey through the TurkStream project, and to China.

But Gazprom has two LNG export projects on the drawing boards: the Baltic LNG project, which will be located near St. Petersburg and produce 10 million tpy when complete, and the Vladivostok LNG project, which will target markets in the Far East.

Russia sees US LNG exports as already encroaching on its traditional markets. Recent deals to supply LNG to new regasification terminals in Poland and Lithuania drive home the point.

Only Cheniere Energy’s LNG export terminal at Sabine Pass, Louisiana, is currently operating, but five more export facilities are under construction that will give the US an export capacity of up to 312 mcm per day.

Another four US export projects are planned with a combined capacity of 198 mcm per day. If all these projects come into operation, the US will rank as one of the largest LNG exporters in the world.

By the middle of the next decade, the LNG industry is expected to play a major role in global energy supply.

As well as new supply coming on stream from the US, more is expected from Qatar and Australia, and new sources will likely become available from East Africa and the East Mediterranean.

However, Russia’s energy ministry has calculated that the country has gas resources that could enable it to produce around 100 million tpy.

Russia last week reported that gas production during 2017 rose to its highest level ever, amounting to a total of 690.5 bcm.

However, the US continues to hold the position as top global gas producer. For the first 10 months of 2017, the US produced 625 bcm, 11% more than Russia for the same period, according to the US Energy Information Administration (EIA).

Edited by

Richard Lockhart

Editor

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