oxford institute for energy studies natural gas research programme russian and its potential impact...
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Russian and its potential impact on the global LNG market
Russian and its potential impact on the global LNG market
JAMES HENDERSON
NATURAL GAS PROGRAMME, OIES
NOVEMBER 2014
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Russia’s LNG strategy under reviewRussia’s LNG strategy under review
Russia and Gazprom have had a long term objective to become a key LNG player
Important to access new markets and to increase flexibility to complement pipeline sales
Geo-political significance for Russia and for Gazprom as a global gas major
Gazprom’s position challenged by ending of LNG export monopoly
However, sanctions and lower oil prices have led to a review of overall strategy among the key Russian gas companies
All Russian projects now in some doubt – pipeline exports now becoming the key focus again, especially into China
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Russia’s gas export expansion optionsRussia’s gas export expansion options
Russia is considering a significant number of options to expand gas exports
Diversification to Asia catalysed LNG options, but the example of Shtokman shows how difficult it can be to justify economics
Pipeline options now being widely discussed, reinforcing Gazprom’s export monopoly position despite challenges from Rosneft and Novatek
Yamal LNG – 16.5mmtCNPC - 3mmtpaGas Natural – 2.5mmtpaGazprom – 3mmtpa
Sakhalin 1 – 5mmtSODECO – 1mmtpaMarubeni – 1.25mmtpaVitol – 2.75mmtpa
Sakhalin 2 – 10mmtVarious Asian buyers Potential for 5mmt expansion
Vladivostok LNG – 10-15mmt
Chayanda
Kovykta
38bcma to China
Pechora LNG – 2.6mmtpa ?
Leningrad LNG – 10mmtpa ?
Gazprom
Novatek
Rosneft
Power of Siberia
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Shtokman- 15mmtpa in Phase 1?
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Altai Pipeline
30bcma to China?
20-30bcma to China?
63bcma to Europe
South Stream
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strategy: LNG options now uncertainPower of Siberia provides foundation for eastern
strategy: LNG options now uncertain
China export deal via Power of Siberia intended as a foundation for LNG strategy Vladivostok LNG may now be postponed in favour of Altai pipeline Sakhalin plans under question – Sakhalin 2 expansion / Sakhalin 1 LNG plant / market
for Sakhalin 3 has? Gas from Sakhalin could now be sold to China via SKV pipeline
Source: Gazprom
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Two scenarios for Russian gas exports in AsiaTwo scenarios for Russian gas exports in Asia
Pipeline sales important because they generate export tax revenues
Potential to increase export sales, but more focussed on one market so higher risk
Sanctions could reduce Russian LNG exports to just current Sakhalin 2 project
Novatek still highly motivated to complete Yamal LNG, but could be further delayed
Rosneft may now view its gas strategy, including Sakhalin 1 LNG, as lower priority given financial constraints
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East Siberia Pipe
Sakhalin 1
Yamal LNG
Vladivostok LNG
Sakhalin Expansion
Sakhalin Current
The LNG export scenario Alternative pipeline export strategy
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Sakhalin 2 Power of Siberia Altai Pipe
SKV to China Sakhalin 2 Expansion Yamal LNG
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price in ChinaGazprom’s pipeline deals can help to set a benchmark
price in China 30 year contract, with peak flow of
38bcma
Ramp up period of five years, starting in 2019
Miller quoted as saying that total value of contract is $400bn
Range of prices is $10-11/mcf, implying $12-13 on east coast
Equivalent to rough estimate of US LNG export price and emerging Chinese domestic price
Altai pipeline sales can also reach Shanghai at competitive levels
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Profile of Russian gas sales to China
Comparable gas prices in Shanghai
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Western LNG projects remain more notional than actualWestern LNG projects remain more notional than actual
Rosneft, Novatek and Gazprom could go head-to-head in the western LNG market
Gazprom has rekindled the idea of the Baltic LNG project – a 10mmt scheme is due online by 2018, with potential to supply bunker market in Europe
Rosneft has partnered with Alltech at Pechora LNG (2.6mmt) although project has not received export approval yet
Gas from Yamal LNG scheduled to arrive in Europe by 20187
Baltic LNG
Pechora LNG
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Gas Input Liquefaction Transport Re-gas
Comparative breakeven cost of Russian and US LNG to Europe
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ConclusionsConclusions
Russia has long harboured ambition to become a major player in the LNG market in Asia and the Atlantic Basin
However, current and possible future sanctions plus financial constraints are now undermining these plans
Gazprom’s export strategy is turning back to a pipeline focus, but this can also affect LNG markets, especially in Asia
Gazprom could be exporting 100bcma to Asia by 2030, although this will depend upon Chinese appetite for gas from a single source
Russia’s LNG plans in the West will depend upon the development of new markets
A key driver in the future of the Russian gas export strategy will be government decisions on providing support from the National Wealth Fund
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