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.”
Recommended Reading
Deep Well Services, CNX Launch JV AutoSep Technologies
2024-04-25 - AutoSep Technologies, a joint venture between Deep Well Services and CNX Resources, will provide automated conventional flowback operations to the oil and gas industry.
EQT Sees Clear Path to $5B in Potential Divestments
2024-04-24 - EQT Corp. executives said that an April deal with Equinor has been a catalyst for talks with potential buyers as the company looks to shed debt for its Equitrans Midstream acquisition.
Matador Hoards Dry Powder for Potential M&A, Adds Delaware Acreage
2024-04-24 - Delaware-focused E&P Matador Resources is growing oil production, expanding midstream capacity, keeping debt low and hunting for M&A opportunities.
TotalEnergies, Vanguard Renewables Form RNG JV in US
2024-04-24 - Total Energies and Vanguard Renewable’s equally owned joint venture initially aims to advance 10 RNG projects into construction during the next 12 months.
Ithaca Energy to Buy Eni's UK Assets in $938MM North Sea Deal
2024-04-23 - Eni, one of Italy's biggest energy companies, will transfer its U.K. business in exchange for 38.5% of Ithaca's share capital, while the existing Ithaca Energy shareholders will own the remaining 61.5% of the combined group.