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2015-04-24 22:15:00



Russia has a five year window, at best, to successfully enter the global LNG markets and even that window is closing fast. That sentiment was the major takeaway from the recent Russian LNG Congress in Moscow.

Experts, including those of the Russian Gas Association, said Russia has only this limited time period to capture a significant share of the LNG market given growing global competition from North America, Australia and North Africa, as well as smaller markets such as Papua New Guinea and Indonesia.

The general consensus is the next decade will be difficult for the Russian gas industry; a stagnating European market, high-cost Asian projects and Western sanctions which have shut the door for investment and technology transfers. The challenge for Russia's fledgling LNG industry is perhaps even greater.

Victor Timoshilov, Head of the East-Oriented Project Coordination Directorate Gazprom, speaking at the Congress noted that "the producers of LNG cannot be in a comfort zone as shocking price mutations affect everyone". This news does not bode well for the Russian economy as a whole, considering its dependence on energy goods and services.

Nevertheless, the Ministry of Energy is planning to increase Russian global LNG levels from its current 4.5% share to 15% by 2035, which will require a highly improbable yearly increase of almost 84 bcm.

Most of the gas will be delivered to Asia, China in particular, though other customers will include South Korea and Japan. Some portion of the LNG is destined for Europe to go pari passu with pipeline-delivered gas. Yet, this optimism will be tempered by the fact that demand from China is also weakening, the result of slower economic growth, which has dropped from a recent high of 13% in 2007 to approximately 6% in 2015.

The Kremlin's ambitious plans will face numerous additional challenges, for instance Russia's lack of capacity in the LNG field. There is only one liquefied gas plant in the country – Sakhalin II, of which Gazprom owns a 50% share together with Royal Dutch Shell (27.5%), Mitsui (12.5%) and Mitsubishi (10%). Sakhalin II's yearly throughput capacity is 12.4 bcm, although Gazprom wants to increase this to 20 bcm after the launch of a third pipeline.

The plant was constructed with considerable help of Western technology provided by Shell, which leads to another problem for Russia – lack of experience and technology in LNG infrastructure construction. Russian LNG experts admit that the sector is highly dependent on the West for technological know-how.

To solve this problem, Russia needs considerable external investment and technology transfers in its LNG sector, though Western sanctions targeting the country's finance and energy sectors, have limited this option. Ultimately, Russia finds itself in a situation where investors are reluctant to commit to an unstable economy of a perceived political aggressor.

The future of another project, Vladivostok-LNG, with a planned 20.7 bcm capacity, remains uncertain, as Gazprom canceled the project to redirect funds for the Power of Siberia pipeline, which is contracted to deliver 38 bcm to China by 2020.

On the positive side, Russia's view on Gazprom's monopoly status is evolving: Rosneft and Novatek were approved for LNG exports, a benefit previously available only for the state-owned giant. Rosneft is considering its own plant in Sakhalin, while private company, Novatek, is planning to launch its Yamal project in 2017, estimated to cost $27 billion with a capacity of 22.8 bcm a year. Yamal is a promising project, though analysts are not clear whether Novatek will export the LNG through the Arctic sea lanes or via more traditional Pacific sea routes.

In light of the dominant position of its global competitors, the Russian LNG sector has no time to waste; to adapt to changing reality, the country needs to rethink its strategy. This includes Russia's determination to maintain oil-indexed pricing in favor of a more flexible model based on the spot market. Furthermore, take or pay contract provisions should be reconsidered, as well as the restrictions on reselling gas to third parties.

Western sanctions have clearly damaged Russia's ability to compete in the LNG field requiring vital capital and technologies. It would appear that Russia will continue its struggle to develop its LNG infrastructure and this opportunity will pass to more flexible global competitors.




2018, February, 16, 23:15:00


AOG - The Dubai Electricity & Water Authority (DEWA) is to invest around $22bn on new energy projects across the next five years, with the renewables sector accounting for an increasing share of electricity generation, according to CEO Saeed Mohammed Al Tayer.

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TRANSCANADA - TransCanada Corporation (TSX:TRP) (NYSE:TRP) (TransCanada or the Company) announced net income attributable to common shares for fourth quarter 2017 of $861 million or $0.98 per share compared to a net loss of $358 million or $0.43 per share for the same period in 2016. For the year ended December 31, 2017, net income attributable to common shares was $3.0 billion or $3.44 per share compared to net income of $124 million or $0.16 per share in 2016.

2018, February, 16, 23:05:00


ROSATOM - February 13, 2018, Moscow. – ROSATOM and the Ministry of Scientific Research and Technological Innovations of the Republic of Congo today signed a Memorandum of Understanding on cooperation in the field of peaceful uses of atomic energy.

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FRB - Industrial production edged down 0.1 percent in January following four consecutive monthly increases. Manufacturing production was unchanged in January. Mining output fell 1.0 percent, with all of its major component industries recording declines, while the index for utilities moved up 0.6 percent. At 107.2 percent of its 2012 average, total industrial production was 3.7 percent higher in January than it was a year earlier. Capacity utilization for the industrial sector fell 0.2 percentage point in January to 77.5 percent, a rate that is 2.3 percentage points below its long-run (1972–2017) average.

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