Medvedev outlines Asian LNG supply plan

Alexander Medvedev, The Deputy Chairman of the Gazprom Management Committee, delivered a report earlier this week entitled “Gazprom in Sakhalin. LNG Supply to Asia-Pacific Markets” at the 18th Annual Conference ‘Sakhalin Oil & Gas 2014’, in Yuzhno-Sakhalinsk.

In the report, it was noted that the Asia-Pacific region was the world's most rapidly growing and dynamically advancing gas market. According to estimates, before 2030 gas consumption in Asia-Pacific will exceed one trillion m³ a year. This would mean that by 2030, Asia-Pacific would account for approximately 25% of the total global gas consumption.

Natural is set to enhance the economic development of a number of Asian countries. China where last year's GDP more than doubled that of the worldwide average, will be a definitive growth driver in the region. Economic growth is a significant reason for such a substantial increase in natural gas demand in Asia, but it is not the only one. Another important reason is the necessity of maintaining the economic growth rates under the restrictions imposed on using nuclear power generation and more stringent environmental requirements. Asian countries, and in particularl China, are trying to systematically revise the structure of their energy balance in order to resolve grave environmental problems.

A high level of gas demand in Asia-Pacific will not be satisfied by means of domestic resources. According to experts' estimates, the aggregate import in the region – both in the key countries (China, Japan, South Korea, Taiwan, India) and new importers (Singapore, Indonesia, Malaysia, Thailand, the Philippines, Vietnam) – will grow from 270 billion m³ in 2013 to 530 billion m³ by 2030. Furthermore, almost 60% of the required volume will be imported.

“Today Asia is the most attractive market for major players of the energy market. Its distinctive features include premium prices as well as an upward trend in long-term demand. It is worth mentioning that in this region gas is used everywhere, including the power generating sector, and this indicates the rational approach of these countries to their economies,” said Mr Medvedev.

In May this year Gazprom signed a 30-year contract to supply over one trillion m3 of Russian pipeline gas to China, the biggest contract in the company’s history.

LNG output

Presently, LNG from the Sakhalin II project, of which Gazprom is the majority shareholder, is being exported to Asian countries, including China. Recently the plant, with a capacity of 10 million tpa hit a record output – over 50 million t of LNG had been produced there since its commissioning in 2009. Today the construction of a third train of Sakhalin II is under consideration. In addition, design and survey operations are underway for the Vladivostok LNG project, for which the Sakhalin gas production center will serve as a resource base. The plant with an annual capacity of ten million tpa (with the possibility of further expansion) will be put onstream in late 2018 – early 2019.

“LNG is a highly competitive and promising product in the gas market. In fact, it is some kind of a flexible pipe able to be laid in any direction and for any distance. As of today, Gazprom delivers LNG to more than ten countries, including Japan, South Korea, China and Taiwan. Once the Vladivostok LNG and the Baltic LNG projects are launched, Gazprom's share in the global LNG market will rise from the current 5 – 15%,” Mr Medvedev stressed.

NGV markets

Gazprom’s LNG projects also focus on the small scale LNG market in Asia. The company is invested in natural gas vehicles (NGV) markets, particularly in China, India, South Korea, Vietnam and Thailand. Chinese authorities support the conversion of motor vehicles to natural gas and have introduced stringent environmental regulations.

Today, China is the biggest and most booming LNG market in the shipment segment. Natural gas is used more widely in public transport – six thousand CNG buses are in service in Beijing, and this number is expected to grow.

“By now, Gazprom has created a solid foundation for large-scale and integrated expansion in the Asian market. A well-balanced combination of pipeline exports and LNG supplies as well as joint NGV projects will make a great contribution to the energy supply of the Asia-Pacific region and will reinforce Gazprom's positions in the global energy market,” concluded Alexander Medvedev.

Adapted from press release by Ted Monroe

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