Russian Role in Global LNG to Grow With Lift of Export Restrictions

By Галина Старинская, August 21, 2013

Russian oil and gas producers strive to supply liquefied natural gas (LNG) to the world markets. The only obstacle is absence of LNG export licensing. The Russian government promises to lift all restrictions by the end of 2013. 

It’s high time to liberalize the export of liquefied natural gas, noted Russia’s Prime Minister Dmitry Medvedev at the end of May. Adding that for traditional gas exports the monopoly must remain – “we must not violate it”. Current Russian legislation establishes Gazprom as exclusive holder of export rights for natural gas, including LNG.

Later, Arkady Dvorkovich, Vice Prime Minister for Energy, said that the liberalization will take place after NOVATEK and Rosneft reach preliminary agreements with their foreign partners. “Once we have certainty with these contracts, the necessary changes will be made to the regulatory framework, which will make it possible to carry out these supplies without excessive competition with Gazprom,” he said (quoted by Interfax), adding that changes in the legislation may be made even in the current year.

Now only one LNG plant (launched in 2009 within Sakhalin-2 project) operates in Russia. Last year, it produced some 10.8 million tons of LNG, shooting over its design capacity of 9.6 million tons. This LNG is consumed by Asian countries, including Japan. Sakhalin Energy, the operator of the project (shareholders: Gazprom (50 percent), Royal Dutch Shell (27.5 percent), Mitsui (12.5 percent) and Mitsubishi (10 percent)) is planning to boost the plant’s annual capacity to nearly 15 million tons of gas.

Gazprom also wants to install an LNG plant in Vladivostok (Russia’s Far East) – the gas giant has already approved the respective investment decision in February. The plant will be built on the Lomonosov peninsula (Perevoznaya Bay). The project is expected to include three phases, 5 million tons per year each, the first penciled to go online in 2018. The plant will use natural gas from Sakhalin production hub, as well as from Yakutia and Irkutsk centers, supplying the end-product to the APR countries. Gazprom also plans to build an LNG plant for the Shtokman project. Recently, Alexei Miller, the head of the monopoly, said that a revolutionary project will be announced soon – giving no further details. According to the Kommersant newspaper, his could mean a plant in Primorsk port (Leningrad region).

Rosneft’s new LNG plant, which the company wants to install on Sakhalin jointly with ExxonMobil, could undermine Gazprom’s unchallenged monopoly on this market in the Far East. Rosneft plans to feed its facility with natural gas from the company’s offshore fields and from Sakhalin-1 project. The project’s operator Exxon Neftegas Limited (shareholders: ExxonMobil (30 percent), Rosneft (20 percent), Japan’s Sodeco (30 percent), India’s ONGC (20 percent)) develops three offshore fields: Chaivo, Odoptu and Arkutun-Dagi. Currently the project produces only oil. For some years, the project partners are trying to negotiate with Gazprom on gas supply scheme. ExxonNeftegas would like to export its gas volumes, but the gas monopoly (and sole holder of export right) is opposing these movements.