Nontransparent Pricing and Social Burden on Companies Hamper the Development of the Russian LPG Market

5 december 2017

The Russian market of liquefied petroleum gas (LPG) is actively developing but still has a number of problems, as noted by the experts of the Analytical Center in the new issue of the Energy Bulletin.

According to the analysts, one of the problems is the nontransparent pricing, which, under conditions of high market concentration and dependence on the external market environment, creates risks for the stable functioning of the domestic market. Another difficulty is a social burden on companies in the form of a so-called "balance gas".

Experts say that the LPG production in Russia has grown significantly in recent years, and about 42% of gas is exported. LPG from Russia is mainly exported to Turkey (33% of total exports in 2016), Poland (21%), Finland (12%) and Ukraine (12%). Shipment of LPG for export is mainly carried out by railway (53%) and by sea (44%) transport.

The experts called the US-China deal for natural gas supplies from Alaska to China a good example of a trade and political deal. "China will receive a sustainable supplier with a probable discount, since the project had no commercial chances either inside the US or in the free market of the Pacific region," as the analysts write. At the same time, there is enough room for Russian gas: the experts are sure that the growth in demand for gas in China continues.

A separate topic of the issue was the global forecast of the International Energy Agency for 2040, which is very important for the global energy sector. Estimates of the IEA forecast for 2040 on the energy consumption growth remain moderately optimistic: about 30% and oil price growth forecasts remain within the baseline scenario.

For more details, see the bulletin "New forecasts of the global and Russian energy".

For other issues of the Energy Bulletin, see the Publications section.