Russia to tap global LNG market

Russia to tap global LNG market

by Oleg Nekhai
Moscow (Voice of Russia) Feb 14, 2013

At present, LNG accounts for nearly 20% of the global gas market. Even though Russia is not among top LNG producers yet, it has the potential to improve its standing.
Russia is ramping up the production of liquefied natural gas.

The Russian JSC Gazprom has completed the development of a project to build a LNG-production facility in Vladivostok with a rated capacity of at least 10 million tons a year, 7 million of which will be supplied to Japan and 3 million - to South Korea. The Voice of Russia's Oleg Nekhai reports.

As more and more new players enter the global LNG market, LNG production is growing faster compared to the pipeline gas market. Liquefied natural gas projects promise diversification of procurement and supplies. Judging by the increasing number of LNG projects, the volume of LNG production capacities may double by 2020. Tatiana Mitrova of the Institute of Energy Research, comments.

"The main players include the United States, where the so-called 'shale revolution' has led to production growth and a substantial drop in prices. In an effort to boost profits, American producers are eager to tap other markets. The ongoing reconstruction of the existing terminals guarantees a substantial saving of resources before LNG production facilities are completed. The US and Canada are prepared to turn out some 200 million tons of liquefied natural gas. Even though few believe it, three LNG projects have secured the approval needed for the start of the construction and have obtained permission to export gas. For this reason, a 35-million-ton output thus sounds quite realistic. The required volumes will hit the market in 2017 and 2018."

Tanzania and Mozambique are among new players. The total gas reserves on the East African shelf amount to 5 trillion cubic meters, which is enough to pursue LNG projects. Operator and consumer companies have demonstrated interest in the projects. The East African region has an advantage of being at an equal distance from Europe and Asia. And there is Australia, which is set to overtake Qatar in a couple of years. The capacity of the LNG plants currently under construction in Australia will reach 80 million tons by the end of the decade. All this means that the LNG market is growing fast, Sergei Pikin of the Energy Development Foundation, says.

"The rapidly growing LNG market calls for maximum flexibility. Gazprom will have to work round the clock. Apart from finding the market for the current production volumes, the company will have to hit it off with companies and buyers of the vast Asia-Pacific market and tap other markets, including the Indian market, which boasts a huge potential for development."

At present, LNG accounts for nearly 20% of the global gas market. Even though Russia is not among top LNG producers yet, it has the potential to improve its standing. Gennady Shmal is president of the Union of Oil and Gas Industrialists.

"For now, Russia has launched only one LNG plant as part of the Sakhalin 2 Project. The plant yields good output and its production volumes will be increased from the current 100 million tons to double the amount by 2020. In contrast, Qatar builds one LNG plant every year. In an effort to speed up the development of LNG production, Gazprom plans to build a facility in Vladivostok. The region's closest neighbors - Japan, South Korea and China - are major consumers of liquefied natural gas."

According to experts, competition on the global LNG market is set to intensify, particularly in the Asia-Pacific region, where prices are traditionally tied to crude oil guaranteeing high yields for the sellers. Russia should act quickly if it wants to secure a place for itself in this race for profit.

Source: Voice of Russia