Russia took a step closer to becoming a dominant player in the global liquefied natural gas market as two of its biggest energy companies advanced plans to export the fuel from its remotest corners.
The two projects combined could export about 26 million tons of LNG a year, which would double Russia’s existing capacity. Already the world’s top exporter of pipeline gas and second-biggest shipper of crude oil, LNG will give President Vladimir Putin a bigger role in driving the world economy via his country’s massive energy resources.
“After the oil price crash of 2015 and a massive addition of Australian LNG, supermajors held back major LNG investments -- but that has changed now. The global LNG market is expected to hit a supply deficit by 2023, according to BloombergNEF’s latest Global LNG Market Outlook. Projects are now being lined up to capture that gap in the market, and the front-runners are those supported by Big Oil.”
- Fauziah Marzuki, analyst, BloombergNEF
Russia, which had 8% of the global LNG market last year, wants to boost that to 20% by 2035 to put it in league with the world’s biggest exporters, such as Qatar and Australia. Thursday’s announcements, made at the Eastern Economic Forum in Vladivostok, underscore how quickly the country is progressing toward that goal. Its first plant, at Gazprom PJSC’s Sakhalin 2, opened in 2009 and its second, Novatek’s Yamal LNG, only started in 2017.
The first production unit at Arctic 2 LNG will come online by the end of the third quarter of 2023, Novatek Chief Executive Officer Leonid Mikhelson said. Once fully complete, the plant will be able to produce 19.8 million tons of LNG annually. Rosneft CEO Igor Sechin didn’t give a timeline for the far east LNG plant, which he said would be able to produce about 6.2 million tons a year.
Russian projects are competing with those in Mozambique, the U.S. and Qatar for customers early next decade, when demand growth is expected to surpass available supply. For now, several export projects, including Yamal, have come online recently and saturated the market, depressing spot LNG prices in Asia to about 60% below where they were a year ago.