Russian LNG exports to find market niche

(Adds details, quotes, background, writes through)

* Russia opens up LNG export for select group of firms

* May consider admitting new players later

* Gazprom pipeline gas export monopoly to stay in place

By Katya Golubkova, Darya Korsunskaya and Denis Pinchuk

MOSCOW, Dec 3 (Reuters) – Russia’s three new liquefied natural gas projects will find plenty of demand in a growing Asian market, without conflicting with Gazprom’s monopoly on pipeline gas exports, Energy Minister Alexander Novak told Reuters.

President Vladimir Putin on Monday signed off on rule changes that enable No.2 gas producer Novatek and top oil firm Rosneft to launch LNG projects.

Russia, home to the world’s second-largest proven gas reserves after Iran, wants to double its share in the global LNG market by 2020 from its current 4.5 percent. Gazprom and Royal Dutch Shell own Russia’s only existing LNG plant on the Pacific island of Sakhalin, and Gazprom plans a second plant in Vladivostok.

Yet Russia needs to hurry up, some say, as players such as Australia, Qatar and the United States either ramp up or prepare to enter the LNG market.

Novak said the three new Russian LNG plants would start production before 2020, when the global market is still expected to face a supply shortfall.

“I often meet analysts and experts, and they all agree that today there is a niche to build plants and sell volumes by 2020. There is a deficit on the LNG market now,” he said on Tuesday.

The plants will quadruple Russian output to 35-40 million tonnes per year of the super-cooled gas, which is more flexible than pipeline gas and can be shipped by tanker to any destination with a regasification terminal.

Russian companies are welcome to ship LNG anywhere if they do not compete with Gazprom, Novak said, adding there were no plans to break up its monopoly on gas exports delivered by pipeline.

“As of now, we don’t see such a need,” he said.


LNG is expensive in Asia, largely due to Japan’s need for fuel to run power stations after most of its nuclear plants were shut following the Fukushima disaster in 2011.

Asian prices are now more than four times the cost of natural gas in the United States, which has a supply glut following a boom in shale gas production.

Japan consumes about a third of the world’s liquefied natural gas and is expected to boost LNG demand to record levels over the next couple of years in a move away from nuclear power.

China, the world’s top energy consumer, is keen to curb use of dirtier coal. It will likely triple the use of natural gas to more than 300 billion cubic metres (bcm) by 2020, of which nearly a third will be imported.

Most new LNG projects around the globe are expected to hit the market later this decade.

Russia’s LNG liberalisation is limited at this point to Rosneft, Novatek, state-owned Zarubezhneft and Gazprom itself, after some companies failed to secure last-minute amendments to the law.

Novak said Russia might open up LNG exports further in the future but would base any decision on market conditions.

The new law dealt a blow to businessman Maxim Barsky’s proposed Pechora LNG. Lukoil, Russia’s No.2 oil producer, has not publicly stated any interest in LNG, although the failed amendments would have benefited it.

The law will protect Gazprom’s exports to Europe, where it accounted for 26 percent of gas sales last year and targets 30 percent by 2020, despite recent declines in market share. Its LNG exports are a tiny fraction of pipeline flows.

Gazprom has been in talks with China for years on a pipeline gas supply deal and has promised a firm deal by year-end. Novak said the deal was on track, adding that booming China gas demand leaves plenty of room for both LNG and piped gas.

“Gas consumption growth rates are much higher than volumes we are offering in total,” he said. (Additional reporting by Vladimir Soldatkin, Vlasta Demyanenko, Anastasia Lyrchikova; Editing by Douglas Busvine and Jane Baird)