Russian President Vladimir Putin will host Asian leaders at the Eastern Economic Forum in Vladivostok, September 11-13, 2018, where discussions are likely to be dominated by trade tensions and North Korea peace talks, as well as the most promising areas for future cooperation. S&P Global Platts Moscow bureau chief Nadia Rodova and oil editor Rosemary Griffin discuss the main areas of energy cooperation and the key risks and opportunities facing Russia-Asian cooperation.
Nadia: Hello and welcome to Global Oil Markets podcast for September 7. I'm Nadia Rodova, managing editor at S&P Global Platts bureau in Moscow. I'm joined today by Moscow-based oil editor Rosemary Griffin to discuss Russia-Asia energy cooperation ahead of next week's Eastern Economic Forum in Vladivostok. In its fourth year, the event has facilitated many new energy cooperation deals between Russia and its Asian partners, Rosemary what can we expect this year?
Rosemary: Well Nadia I think it's really striking how different the geopolitical landscape is this year compared to last year, so it will be very interesting to hear what both national leaders and energy company representatives have to say. The next few months could see some major changes that may affect the regional energy sector - from sanctions against Iran coming back into force, to potential new US sanctions against Russia, and peace talks with North Korea.
Nadia: Right, we're expecting the Japanese and South Korean prime ministers to join Putin at this year's event, so we should get some more insight into how they see energy cooperation developing. I thought it was interesting earlier this year when Putin, who backs the peace talks, said he sees many opportunities for joint, trilateral and quadrilateral cooperation in North Asia.
Rosemary: Yes, so analysts are a bit divided on how quickly there may be any real progress there. Gazprom and Kogas could revive a plan to build a 10Bcm/year gas pipeline running through North Korea to the South, and that could create further potential for onward shipments to Japan and China. But that would require a durable peace deal that all parties commit to and believe will last.
Nadia: In terms of oil, it seems the immediate impact of a peace deal would likely be minimal, given limited demand in North Korea itself. In the longer term, if a gas pipeline was successful, then they may look to build an oil pipeline through the north to the south. There are the obvious advantages to Russia as a supplier for Korea compared to the Middle East, including its location and the lack of chokepoints in the supply process.
Rosemary: Russia's oil deliveries to Asia is such an interesting area at the moment given the uncertainty over how much Iranian oil will leave the market in November. That could be an opportunity for Russia. Some traders are saying that countries, including China, may look to increase Russian supplies. Russia's location is a big factor, but also the recent competitiveness of dated Brent grades, including Urals.
Nadia: Yes, I think the potential for additional Russian volumes to be sent to Asia towards the end of this year may be overplayed… some details on key Asian export markets for Russia.
Rosemary: Speaking of China we could also hear some interesting commentary on the trade war with the US and how China is looking to approach that. Some analysts see this tension as possibly bringing Russian and Chinese companies closer together.
Nadia: Right, that could include the possibility of developing non-dollar denominated crude trading. That's something that both Russia and China have indicated they are interested in. The forex risk seems very significant, and we're not expecting this to develop quickly in the near term, but it's something to keep an eye on. The financial element in some of the proposed new US sanctions has certainly increased talk about that possibility in Russia.
Rosemary: Finally, it's an event during which Russian and Asian companies like to sign new cooperation deals, or initiate talks on such deals. One area to watch this year is LNG. Russia has ambitious plans to develop its LNG production capacity and we have seen interest from companies including Japan's Mitsui in Gazprom's Baltic LNG. Japanese and Chinese investors have also expressed interest in Novatek's Arctic LNG 2. CNPC and China's Silk Road Fund already successfully work with Novatek on its Yamal LNG project, so that would be a logical progression of that cooperation.
Nadia: Right, that's a project which is attracting a lot of interest from other potential partners too, including Saudi Arabia. So, it's set to be an interesting week. That was Rosemary Griffin and Nadia Rodova today in the studio.