HomeMediaLatest NewsRussia has prepared for the end of the gas pipelines era by developing LNG projects

Russia has prepared for the end of the gas pipelines era by developing LNG projects

11 October 2020

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Deputy Principal Director on Energy Alexei Belogoryev commented to Economy Today on the prospects for competing LNG and pipeline gas in international trade.

Increasing role of LNG in the global energy sector creates risks for Russia, Aleksey Belogoryev, Deputy Principal Director for Energy at the Institute for Energy and Finance says.

The Russian Energy Minister Alexander Novak predicted that by 2035 LNG will overtake pipeline gas in the world market with a sales share of 52% of global gas consumption.

“It is difficult to talk about percentages: it is not known what data Novak relied on, but in general his opinion reflects the current trend in the global energy market. The demand for gas and international gas trade is growing in the world, and most of this growth is accounted for by LNG, so the era of large pipeline construction projects is coming to the end,” Belogoryev says.

“There are few major pipeline projects in the world, and if we talk about international trade, it is typical for it that a significant part of the new demand is satisfied by domestic production. If 60% of production is traded on the international oil market, then this figure for gas is 30%,” Belogoryev summarizes.

 “International gas trade will mainly grow due to LNG - here we cannot but agree with Novak. It is inevitable that LNG will overtake pipeline gas - one can only argue about when this will happen,” Belogoryev concludes.

“Novatek has many plans for the further construction of LNG plants, and this is not only Arctic LNG-2, but also the continuation of the active development of Gydan and Yamal. There is also Gazprom's Baltic LNG and Rosneft's plans for Far Eastern LNG. The plans are very ambitious, but they have pitfalls,” Belogoriev says. In terms of budget revenues, LNG is less profitable than pipeline gas. “First of all, this concerns benefits, since without state support. All the key Arctic projects will not pay off. Most LNG projects will generate much less revenue than pipeline gas. In this sense, the profitability of the sector may fall, as well as the efficiency of gas exports for the state,” Belogoryev concludes.

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