Gazprom’s intention to increase its liquefaction capacity by 250% to 25 million tons per year by 2018 in the global LNG market will pose challenges to the company, according to a GlobalData analyst.

Anna Belova, Ph.D., GlobalData’s lead upstream analyst covering the former Soviet Union, said that Gazprom is looking to expand aggressively beyond pipeline-based gas to extend its reach into Asian demand centers. Gazprom is the world’s leading natural gas producer.

Gazprom has a cost and logistical advantage in its current markets, but ramping up LNG activities will mean facing competition from Australia, the Middle East and the U.S., as well as new Russian rivals.

“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,” Belova said.

“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.”

According to Belova, the current pipeline of LNG projects coming online will give Russia 8% of global liquefaction capacity by 2018—making it difficult for Gazprom to secure its target of 15% total market share by that time.

However, GlobalData said that Russia still has the potential to become a major LNG player, due to its world-leading gas reserves and the Russian government’s strategy of employing attractive fiscal incentives for the oil and gas industry.

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