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Russia's Gazprom can set new natural gas export record at nearly 200 Bcm in 2018: CEO

Russian gas giant Gazprom can set a new historical gas export record ofnearly 200 Bcm in 2018, up nearly 3% on the year, as demand in Europecontinues rising amid declining production in the region, the company'sCEO Alexei Miller said Friday.

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* Supply increase driven by decline in European production

* LNG supplies to Europe seen marginal

The company has already grown its deliveries to Europe and Turkey by 5.7%on the year to 101.2 Bcm in the first six months of the year, he toldGazprom's general shareholders meeting.

"If the trend continues, our exports to the far abroad as a result of2018 can enter a new historical record, of about 200 Bcm," Miller said.

Gazprom's Deputy CEO, Alexander Medvedev, went further, saying thecompany's gas exports will exceed the 200 Bcm mark this year, and in thefollowing years.

"I believe there will be more than 200 Bcm. In the mid- and long-term,due to the factors ... of growing demand and falling production [inEurope], Gazprom has great potential to increase its exports above theseindicators," he said.

Last year, Gazprom exported a record volume of 194.4 Bcm of gas to Europeand Turkey.

The company's subsidiary Gazprom Export estimates gas deliveries toEurope and Turkey at the level of around 195-200 Bcm/year in the nearfuture, company CEO Elena Burmistrova said in May.

As European gas consumption rose last year -- by 4.9% on the year to568.2 Bcm -- so did Gazprom's share in the region's consumption, Millersaid, adding it reached "record levels of 34.2%" last year, up from 33%.

"The key growth drivers were rising economic activity in the Europeancountries and the trend for a decrease in European production formed inthe past years. The resource base for European gas industry isnarrowing," Miller said, specifically noting falling output at Groningenfield in the Netherlands.

Miller also dismissed LNG competition, including from the US, withGazprom's pipeline gas, saying, "The development of global LNG does notlead to radical changes in European gas balance."

US LNG accounted for about 0.5% in European 2017 consumption, with lessthan 2 million mt delivered to European customers, "mainly those notreceiving Russian gas," he said. "US LNG deliveries are held back by thehigh costs of production cycles and transportation across the ocean."

Meanwhile, Gazprom last year also delivered its first LNG to Spain, a newmarket for the company which it has no direct pipeline link with, Millersaid.

PRODUCTION BEATS FORECAST

Gazprom plans to also revise up its gas production plan by about 15 Bcmfrom a previously expected 474 Bcm this year, said Vitaly Markelov,deputy chairman of the company's management committee.

"We are considering a production increase in 2018. Last year, the companyproduced 471 Bcm. Today we are moving ahead of the plan for 474 Bcm inproduction by about 15 Bcm. We see our plans will be corrected upwardsbased on the results of the first half of 2018," he said.

The company produced more gas than expected in the first half of thisyear due to greater demand from Europe during cold winter and earlyspring.

"In the heating season of 2017-18, during heavy cold in Europe, Gazpromset 10 daily records in supplies to the far abroad," Miller said.

In March 2018 alone, the company set an absolute record of 713.4 millioncu m/day of gas supplies to the region, he added.

--Nastassia Astrasheuskaya, nastia.astrasheuska@spglobal.com

--Edited by James Leech, newsdesk@spglobal.com

(Corrects export figure in last sentence of story published June 29.)