GlobalData: New Russian Players To Double Share In Global LNG Market By 2018

December 2014, Vol. 241, No. 12

The global LNG market, in which Gazprom intends to increase its liquefaction capacity by 250% to 25 million tons per year by 2018, will pose unfamiliar challenges to the company, according to an analyst with research and consulting firm GlobalData.

Anna Belova, Ph.D., GlobalData’s Lead Upstream Analyst covering the Former Soviet Union, states that Gazprom, the world’s leading natural gas producer, is seeking to expand aggressively beyond pipeline-based gas marketing in order to extend its reach into Asian demand centers. While Gazprom has a cost and logistical advantage in its markets, upscaling LNG activities will encounter competition from Australia, the Middle East, and the U.S., further compounded by new Russian rivals.

Belova explains: “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.

“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.”

The analyst notes that the current pipeline of LNG projects coming online will give Russia 8% of global liquefaction capacity by 2018, making it very difficult for Gazprom to secure its target of 15% total market share by that time. Despite this, GlobalData believes Russia can become a major LNG player, due to its world-leading gas reserves and the government’s aggressive strategy of employing attractive fiscal incentives for the oil and gas industry.

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