Russia lacking integrated gas export strategy
As Russian companies are now seeking to conquer the world's liquefied natural gas (LNG) markets in addition to traditional gas supplies, they should develop a unified strategy to avoid, or at least manage, potential internal competition, consider energy experts.
Russia's gas producers should develop an integrated strategy to supply their final consumers amid fierce competition, says S&P Global Platts citing Director of the Skolkovo Energy Centre Tatiana Mitrova. Gazprom and Novatek, the two leading Russian gas and LNG players, are now competing not only with international players but also with each other.
Both companies are exporting their products to Europe and Asia. Gazprom's supplies to Europe declined in December, while Novatek increased exports to Europe from its Yamal LNG plant due to low Asian prices and uneconomical spreads. Overall, Russian natural gas exports to Europe decreased by 6,3 million m³/day in November and by 0,4 million m³/day in December year on year.
Meanwhile, the global LNG market is a ''cruel battlefield'' with many strong competitors, such as Qatar, the US and Australia, considers Mitrova. Highly unpredictable demand with buyers seeking more flexibility and short-term commitment is making such companies as Total and Shell increase their portfolios to adapt to demand flexibility requirements. ''I was in Singapore last week, and Asian participants were talking about 50% of the contracts being short-term by 2025,'' she said. ''Although that is wishful thinking, it shows the mood.''
An integrated export strategy like the one Russia has for oil can become a solution, believes Mitrova. She assumed that national producers could provide flexible supply with gas for baseload and LNG for peak demand, adding that versatility, creativity and speed were key to success in the evolving market.
At the moment, 75% of Gazprom's sales to Europe are secured by long-term contracts. The producer accounted for 36,7% of the European gas market in 2018, while a year earlier, its share totalled 34,2%. The expected launch of the Nord Stream 2 pipeline to Germany will contribute to further growth. Simultaneously, Novatek is strengthening its position of the key national LNG supplier. The producer is expected to increase its capacity by more than 20 million tonnes per year by 2023-2024.
Russian LNG exports are likely to grow significantly by 2025 after two new plants, Arctic LNG 2 and Baltic LNG, are commissioned. Mitrova expects Russia's share of the global LNG market to increase to 12-13% by 2025 from 5% in 2017.