HomeMediaLatest NewsThe problem of import substitution of equipment for LNG is 8 years old

The problem of import substitution of equipment for LNG is 8 years old

12 April 2022

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Alexey Gromov commented to the Oil and Capital Internet portal about the EU ban on the supply of technologies and equipment for the LNG plants construction to Russia.

“The dependence of the Russian industry, especially large-tonnage LNG, on foreign technologies and equipment is quite high. For the main processes, Russian companies are completely dependent on imported technological solutions, and this was clear back in 2014. Everyone understood that it would be very difficult to quickly develop domestic analogues for Russia alone in the LNG segment. Therefore, the imposed sanctions are a serious blow to the Russian liquefaction industry. Given that we have not fully purchased equipment for projects already under construction, these sanctions will at least postpone the implementation of new plants.

The problem of import substitution of equipment for LNG production has existed since the introduction of the first sanctions in 2014 — 8 years have passed, and the progress in the development of relevant technologies in Russia is minimal. The complexity of an LNG plant, especially when built on platforms, as in the Russian Arctic, is comparable to building a spaceship. Therefore, it is difficult to quickly ensure import substitution.

We hope that NOVATEK has gained experience in technical cooperation with the French Total.

But it is not yet possible to say that we will be able to organize a full technological cycle of LNG production in Russia in the coming years. Therefore, Russia will be forced to revise its plans for the LNG industry development, adjust the timing of the commissioning of new projects. Perhaps some of them will have to be abandoned for a while.

Russia's presence in the global LNG market will be reduced, but this will primarily be due to the global growth in the volume of gas liquefaction. In the next 5-7 years, the United States and Qatar are going to introduce new capacities. Russia will continue to liquefy approximately the volumes of LNG that it produces now.

Growth is only possible through Arctic LNG 2. Therefore, taking into account the implementation of LNG projects in other countries, it can be assumed that Russia's share in the world market will decrease in the medium term.

As for the European market, now there is not enough Russian liquefied gas on it. At the end of 2021, Russian companies supplied about 15 billion cubic meters of LNG to the EU, and this against the backdrop of exporting 145 billion of Russian pipeline gas. But from the point of view of the EU strategy for the transition to LNG, these sanctions also worsen the EU's economic opportunities. In the next two years, it was Russia that was supposed to increase LNG production in the world. That is, we see a course towards an accelerated and uncontested rejection of Russian gas in any of its state of aggregation.”

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
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