GAZPROM’S moves to up its LNG production fivefold to take advantage of the lucrative Asian market will be hampered by competition from domestic and international players, according to an industry analyst.
GlobalData’s lead upstream analyst covering the former Soviet Union Anna Belova says while Gazprom has a cost and logistical advantage in its current markets, competition from Australia, the Middle East, the US and domestic rivals will be challenging.
Ms Belova said recent regulatory changes have expanded gas export options beyond Gazprom, benefitting rivals Rosneft and Novatek.
“Based on announced development plans, Rosneft and Novatek will account for almost half of Russia’s liquefaction capacity by 2018,” Ms Belova said.
Backed by foreign partners, the companies 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,” Ms Belova said.
She said the current pipeline of LNG projects coming online will give Russia eight per cent 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 the negativity around Gazprom, Ms Belova said Russia had the potential to become a major LNG player, due to its huge gas reserves and the government’s aggressive strategy of employing attractive fiscal incentives for the oil and gas industry.
“Industry-wide tax breaks, when combined with advantageous cost structures at field level, can incentivise Russian LNG aspirants to overcome the high capital costs associated with liquefaction and export infrastructure,” Ms Belova said.
“Government backing and strategic international partnerships will expand the Russian LNG industry’s reach into global markets, with multiple operators contributing to growth,” she said.