Russia May Break Gazprom Monopoly To Stimulate LNG

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By Irina Slav, Oilprice.com

A Russian Security Council commission has recommended breaking down Gazprom’s gas export monopoly in a bid to boost the competitiveness of Russia’s gas, Russian daily Vedomosti reported after seeing the protocol from a July 6 meeting of the commission.

The global rise in LNG as a replacement for natural gas and oil is a threat to Russia’s energy security, the commission concluded, and Moscow needs to take urgent action to turn Russia into a major exporter of LNG.

The global structure of fuel demand is changing, the protocol said, and new LNG projects are spurring more intense competition in Europe and Asia – key markets for Russian natural gas. To tackle the problem, the commission proposed prioritizing the development of the local LNG industry, devising a “coordinated strategy” for gas deliveries to key markets, and liberalizing gas exports.

Currently, Gazprom is the sole pipeline exporter of natural gas. There is one LNG plant in Russia, with an annual capacity of 9.6 million tons, operated by Sakhalin Energy, a company that’s majority-owned by Gazprom. Companies other than Gazprom can export LNG, however, as long as they were licensed by 2013 to develop gas deposits with the option of building liquefaction trains there.

Novatek, Russia’s largest gas independent, staked a claim in LNG when it started building the Yamal LNG plant, which should start operating by the end of this year. When it reaches full capacity, in two years, the Yamal facility would process 16.5 million tons of LNG. Novatek also has plans for another LNG plant, Arctic LNG-2, with an annual capacity of 18 million tons.

Gazprom is pursuing its own LNG projects: the state company has two LNG plants in the works with a combined capacity of 20 million tons annually. Rosneft, the other state mammoth, holds the majority stake in Pechora LNG, but the capacity and timeline for this project have not yet been established.

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