Russian Natural Gas Sales Depend on the State of Competition in the Domestic Market

10 october 2017

"Sustained economic growth in Europe and the continued reduction of domestic natural gas production in the EU have been important factors in the increase of the exports of Russian natural gas," Analytical Center expert Alexander Kurdin said, speaking at the 7th Saint Petersburg International Natural Gas Forum.

The expert talked about the prospects of Russian gas in an environment of global competition. In his opinion, the format of natural gas contracts in Europe and Asia is going to depend on whether or not customers can switch between suppliers and suppliers can switch between customers. "If competition increases, a shift towards shorter term contracts with minimal mutual guarantees and free competitive prices is inevitable," the specialist believes. The competitiveness of Russian exports of natural gas also depends on the state of competition in the domestic market as that would drive competitive incentives for Russian natural gas producers, Mr. Kurdin noted.

As for the geographic composition and trends in the market, US natural gas was having a significant effect on the market long before they started exporting LNG. In 2016 58% of LNG sales form the US went to Latin American and only 9% went to Europe. "Here it's important to create a single global market in which LNG form the US, Australia and Africa would be present both in terms of the ability of suppliers from all over the world to enter any regional market and in terms of redirecting the flows," the expert believes.

Mr. Kurdin also noted that an articulated priority between natural gas supplied via pipelines and LNG is unnecessary. "You have got to be able to offer both, because it is rather a question of diversification," the expert believes.

The Saint Petersburg International Natural Gas Forum 2017 is a leading venue for discussing the relevant issues the industry is facing. This year the key topics were: global trends in the natural gas industry and state policy, energy security and development prospects, natural gas based motor fuel, LNG, engineering in the natural gas industry, technological development and diagnostics.

Traditionally, the Analytical Center was among the backers of the Saint Petersburg International Natural Gas Forum.

Picture from open sources