Russia Grows Its Share on World Market of Liquefied Gas
NOVATEK launched the second line of liquefaction at the Yamal LNG plant six months ahead of schedule. Now its production capacity has doubled and amounts to 11 million tons per year. Forpost explored whether Russian liquid methane is in demand on the world gas market and if Russian companies have the capacity to challenge Americans on this market.
Last year, the US became a net exporter of gas. Exports of natural gas from this country exceeded imports by 11 million cubic meters per day. In 2017, Americans supplied 53 million cubic meters of LNG per day to other countries.
The plans of the United States government to significantly increase this figure by commissioning new capacities and, apparently, these plans are quite feasible. So, last spring the first batch of liquefied gas was shipped from a new plant in Maryland; its capacity is 5.25 million tons per year. And in 2019 the first production lines in Texas and Louisiana with a total capacity of 10 million tons are lined up for a launch.
The main buyers of LNG are the countries of the Pacific Rim: Japan, South Korea, China and India. However, in the wake of such a large-scale increase in exports, American politicians started talking about their intention to enter the European market and challenge Gazprom’s positions there. At that, they decided to compete with the Russian company through political pressure.
Poland and Lithuania were the first to let themselves be tempted by the transatlantic allies, who in 2017 bought LNG from America and announced that they intend to abandon the import of pipeline gas altogether. Economic realities, however, quickly prevailed over the Russophobe frenzy since natural gas from the US turned out to be about twice as expensive as Russia’s.
In this context, Gazprom continued to beat historical records of exports to Europe. Moreover, after commissioning the Yamal LNG plant in December 2017, Russia has become a successful player on the liquefied gas market. Novatek products are in demand in various regions of the world, and almost all of them (99%) are already allocated in contracts for decades ahead.
“I believe that liquefied natural gas has great prospects, since it can be transported long distance. Yes, pipe delivery is cheaper, but it is limited, sooner or later its capacity ends, but the extent of potential supply routes is unlimited. Therefore, we certainly need to develop the LNG industry. We can successfully compete with the USA here, first of all, because we are much closer to our target markets than America. And I am sure that when we build a plant in the Baltic with a capacity of 10 million tons per year, its products will also be in demand,” says Sergey Gustov, Director General of Gazprom LNG St. Petersburg.
On 23 July Yamal LNG shipped the third million of tons of LNG. This was the 41st batch shipped from the Port of Sabetta. Now the traffic of tankers in the Kara Sea will double, and after commissioning of the third line the plant will reach the stated projected capacity of 16.5 million tons. The experts have no doubt that it will happen, and ahead of the initial schedule.
The shareholders of Yamal LNG are Russian Novatek (50.1%), French Total (20%), China National Petroleum Corporation CNPC (20%) and Chinese Silk Road Fund (9.9%). Such a strong body of investors made possible the uninterrupted financing of works, the total cost of which is USD 27 billion.
“The plant is built on the east cost of the Yamal Peninsula directly on its resource base, over the South Tambey gas condensate field. The unique location has made it possible to create a competitive logistics model that provides year-round LNG supplies to the markets of the countries of the Pacific Rim and Europe,” says Valentin Stepanov, PhD in Geology and Mineralogical Sciences, Associate Professor of St. Petersburg Mining University.
The main exporters of liquefied gas today are Qatar, Australia, Malaysia, Nigeria and Indonesia. Domestic companies take up about 5% of the world market. According to analysts, over the long term, considering the implementation of the Yamal project and plans for the construction of other plants, our share should grow at least double fold, and the annual production volume should reach 50 million tons.
According to most experts, the Russian expansion does not threaten the positions of other exporters. For example, Shell expects that until 2030 the demand for liquefied gas will grow two times faster than for the pipeline gas. According to the company’s representatives, the world market volume by then will increase by 1.8 fold, to 460 million tons.
PAO NOVATEK is a partner of the International Forum ‘Russian Energy Week’, which will be held on 3–6 October 2018 in Moscow. In his speech at the plenary session ‘Russian Fuel and Energy Industry: National Interests and Global Trends’ at the REW 2017 Leonid Mikhelson, Chairman of the Management Board of the Company, noted that over the past 10 years, gas consumption in the world has increased by 20%, and LNG consumption by 70%. “Approximately the same growth is projected until 2030: 30% for gas and 70% for LNG. The main reasons for the increase in gas consumption are its ecological characteristics; gas power generation has the lowest capital cost… Asia-Pacific countries will be the key drivers of consumption growth,” noted Leonid Mikhelson. Discussion of the industry achievements and further developments will resume at the REW 2018.
