GAZPROM: STOP LNG
Gazprom has said it could shelve its Vladivostok liquefied natural gas project as the Russian state-controlled energy giant focuses on supplying more gas to China by pipeline.
The project, which had been scheduled to start production in 2018 with capacity of 10m tonnes a year of LNG, would be the first major Russian energy project to be publicly scrapped since the US and Europe targeted the country's energy industry with sanctions.
Analysts said the plant may appear less attractive given expectations of a glut of LNG as projects in Australia and Indonesia start production and US exports of shale gas ramp up.
"Gazprom is ready to consider the possibility of supplying pipeline gas to China as an alternative to the Vladivostok LNG project," Alexei Miller, Gazprom chief executive, said in a statement during a visit to Beijing. Much of the LNG produced at Vladivostok was likely to have been sold to China's regional rival Japan.
Western sanctions have so far not touched the Russian gas industry, with politicians fearing that Moscow could retaliate by cutting off European countries' gas supplies.
However, Gazprom's oil subsidiary, Gazprom Neft , is subject to US sanctions on the supply of equipment and technology for certain types of oil production as well as European financial sanctions. Like other Russian companies, Gazprom has been affected by the reluctance of western investors and banks to lend them money.
The Vladivostok LNG project is one of several LNG plants planned over the next five to 10 years that had been intended to make Russia a major player in the global LNG markets.
Gazprom said in 2012 that the plant would cost $7.3bn, as part of a much larger programme of gas development and pipeline building in the east of Russia that would cost about $50bn.
Another flagship Russian project, Yamal LNG, owned by Novatek , Total and CNPC, is attempting to raise financing in spite of US sanctions against its majority shareholder Novatek.
Gazprom is constructing the $30bn Power of Siberia pipeline after a landmark agreement on gas sales to China was signed in May. Mr Miller said the company hoped to sign additional deals to sell more gas to Beijing.
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