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Russia’s share of the LNG market

Hydrocarbon Engineering,

GlobalData has said that Gazprom is going to be posed with some unfamiliar challenges as it increases its liquefaction capacity by 250% to 25 million tpy by 2018. Lead Upstream Analyst for the FSU at GlobalData, Anna Belova, has said that Gazprom is looking to aggressively expand beyond pipeline based gas marketing in order to extend its reach into Asia.

The challenges

Gazprom, according to GlobalData does have a cost and logistical advantage in its current markets, however upscaling LNG activities will mean encountering competition from Australia, the Middle East, and the US, further compounded by new Russian rivals. Belova said, ‘Rosneft and Novatek, backed by foreign partners, plan to bring new liquefaction plants online by 2018. Rosneft’s determination to become a world class integrated oil and gas company requires it to expand its gas operations, while Novatek, the second largest gas producer in Russia after Gazprom, seeks access to international markets through LNG.

‘The two companies are the main beneficiaries of recent regulatory changes in Russia, expanding gas export options beyond Gazprom. Based on announced development plans, Rosneft and Novatek will account for almost half of Russia’s liquefaction capacity by 2018.’

Belova has also noted that the current pipeline of LNG projects coming online will give Russia 8% of global liquefaction capacity by 2018. This will make it very difficult for Gazprom to secure its target of 15% total market share by that time.

A major player

Despite the above, GlobalData does indeed believe that Russia has the potential to become a major LNG player. This is mainly due to its world leading gas reserves and the government’s aggressive strategy of employing fiscal incentives for the oil and gas industry.

Belova concluded, ‘industry wide tax breaks, when combined with advantageous cost structures at field level, can incentivise Russian LNG aspirants to overcome the high capital costs associated with liquefaction and export infrastructure. Government backing and strategic international partnerships will expand the Russian LNG industry’s reach into global markets, with multiple operators contributing to growth.’

Edited from press release by Claira Lloyd

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