Asia Pacific Remains Key for Sales of Russian LNG

28 december 2017 | Russia - 24

"After 2020 there are plans for 3 major projects that no investment decisions have yet been made regarding the implementation of: the Baltic LNG (10 mln tonnes), the Arctic LNG (16.5 mln tonnes) on the Gydansky peninsula as well as the construction of the third stage of Sakhalin LNG (4.8 mln tonnes). Should all these projects be implemented, the total LNG export capacity may reach 25-30 mln tonnes per year (or about 35-40 bln cubic meters of natural gas), which is going to be exported primarily to Asia Pacific," Analytical Center expert Svyatoslav Pikh said in an interview for Russia 24.

Svyatoslav Pikh
Svyatoslav Pikh
Department for Fuel and Energy Sector

Earlier the Russian president Vladimir Putin instructed the government to make changes to the Energy Security Doctrine of Russia and other strategic documents. The president said the new versions of the documents had to take into account threats to the country's energy security stemming from the development of LNG production, adding that main areas in the LNG production policy must be identified that would help Russia become a leader in this sector in the medium term.

Today's biggest large scale LNG production projects include the Saklhalin LNG project implemented in 2009 that has a capacity of 10 mln tonnes (14 bln cubic meters of natural gas) as well as the first lien of the Yamal LNG project with a capacity of 5.5 mln tonnes of LNG (7.5 bln cubic meters of natural gas), which went online in December 2017. The share of LNG in Russia's total natural gas output was 2% as of 2016 (excluding Yamal LNG) and with the first line of Yamal LNG taken into account it wasa 3%. The share of LNG in Russia's total exports is about 7%, excluding Yamal LNG and about 10% with Yamal LNG factored in.

At the moment there are no LNG transshipment centers in Asia Pacific so it is hard to estimate the exact costs of a project like that. Creating such centers, say in the Far East, would call for the production and delivery of LNG on a 24/7 basis to make sure the transshipment capacity is never idle. At the moment there are major question regarding the possibility of reliable use of the Northern Sea Route, under NOVATEK's current plans during the winter LNG will have to be shipped from Yamal via the longer route through the Mediterranean Sea and the Suez canal. This means that these kinds of projects need very serious financial assessment.

As of late 2016 total global LNG production was 260 mln tonnes. Preliminary estimates for 2017 suggest the global LNG output may increase by 10-20 mln tonnes. The absolute leader in LNG production and exports is Qatar, which sells about 80 mln tonnes of LNG annually (over 100 bln cubic meters). Over the past few years Australia has also become a leading LNG producer: in 2013-2017 several major LNG production projects were implemented there, all targeting Asia Pacific customers. In addition to Australia, another major player that is expected to enter the market in the next few years is the US where a number of big LNG exports projects are about to go online.

A key target region for LNG sales both for industry leaders and for Russia is Asia Pacific because of the potential for demand growth in China and other South East Asian countries.

Source: Russia - 24

Photo: from open sources