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Russia's Gazprom eyes benefit from slowdown in LNG project investment

Highlights

Macroeconomic landscape has affected LNG industry development

US LNG cannot be considered basis for regional energy security

Russian LNG can penetrate new sales markets: board

London — The board of Russian gas giant Gazprom sees an opportunity for the company to benefit from the slowdown in new LNG export project developments in the longer term, the company said Nov. 25.

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In a statement, Gazprom said its board in a meeting also noted that Russia had significant gas resources that would enable it to increase the country's LNG production to be able to penetrate new markets.

"The macroeconomic situation has had a negative impact on the long-term development prospects of the LNG industry," Gazprom said, adding that so far in 2020 only one final investment decision had been made for a new LNG production project.

That was Sempra's 3.25 million mt/year Energia Costa Azul LNG liquefaction terminal in Baja California, Mexico, which reached FID earlier this month.

The Pacific Coast project is designed to link gas supplies from Texas and the Western US to markets in Mexico and countries across the Pacific Basin, Sempra said.

Gazprom said Nov. 25 that in addition to the lack of FIDs, the launch dates for a number of projects have been postponed.

It said the decline in activity in 2020 could have a long-term impact on LNG production, which would lead to an additional opportunity for Gazprom's gas supplies.

It had been expected that 2020 would see numerous LNG project FIDs after 2019 saw a record number of FIDs for projects in the US, Russia, Nigeria and Mozambique for a total capacity increase of more than 90 Bcm/year.

The board of Gazprom, which has often hit out at US LNG economics in particular, highlighted the cancelation of US LNG cargoes over the summer and said US LNG could not be considered as "the basis of energy security for large gas-consuming countries, and even more so for entire regional markets, such as Europe."

Russian LNG

The board also said Gazprom would increase its imports of pipeline gas to China, but could also increase LNG output.

"Russia has sufficient resource potential for the growth of LNG production," the company said.

"At the same time, it is advisable to use the possibility of transporting gas in the form of LNG to diversify export directions and enter new sales markets that do not have the ability to import it via gas pipelines," it said.

Gazprom is developing a new 13 million mt/year LNG export facility at Ust-Luga in northwest Russia to add to its 10.8 million mt/year Sakhalin LNG facility.

Russia's new energy strategy published in April includes a lofty forecast for LNG production of as much as 140 million mt by 2035, a significant increase compared with both current capacity and its previous projections.

There are currently only two operational LNG facilities in Russia -- Sakhalin LNG and the 16.5 million mt/year Yamal LNG facility whose first train became operational in 2017.

Both plants can operate at above technical capacity, giving Russia a total LNG production capacity of closer to 30 million mt/year.

Among the LNG projects also in the development stage are Novatek's 19.8 million mt/year Arctic LNG 2 plant and A-Property's two-train, 13 million mt/year facility in Russia's Far East.