Alexey Belogoryev, Deputy Principal Director on Energy Studies commented to Oil and Capital on the competition between pipeline and liquefied gas exports from Russia.
Despite the fact that while one of the most negative scenarios for developing the COVID-19 pandemic is being implemented, the general expectation remains an increase in LNG demand in 2021. “Until recently, we estimated it at 11.5% y /y, today I would talk about 7-8%. The main growth in LNG consumption in 2021 should be demonstrated by India, China and the countries of Southeast Asia. An increase in demand is also highly likely in Northwest Europe and, slightly less clearly, in Southern Europe. In the long term, significant growth can be expected in a number of Latin American countries (Chile, Colombia, Panama, etc.), Bangladesh and Pakistan, and some countries of the Middle East (for example, Bahrain). But the growth of consumption in the already noted China, India and Southeast Asian countries will play a decisive role,” the expert said.
Answering the question about the competition of Russian gas exporters, he noted that Russian pipeline gas and liquefied gas from the Yamal LNG plant (it reasonable to talk only about it for now), of course, compete with each other in North-Western Europe and in the future will collide in China, but it will not be direct competition: “The consumer does not have an alternative, to buy one type of Russian gas or another. He is thinking about what is more profitable for him in terms of prices: to buy gas under a long-term contract with Gazprom or Equinor or LNG on a spot or short-term basis? And it doesn't really matter whose LNG it is, as long as it's price competitive. It does not say that it is Russian.
In the context of the crisis of “overproduction” on the global LNG market, the arrival of Yamal LNG to Europe is one of the pressure factors on Gazprom, but far from the main one. If this gas went entirely to the Asia-Pacific region, it would not have become easier for Gazprom in principle,” Belogoryev said.
According to him, there are actually not so many markets, where a direct choice between pipeline and liquefied gas would be possible: “Basically, this is the European market (and even not all), the coastal regions of China, in the future - certain regions of India, the countries of the Middle East, etc. In general, they have different sales markets, both existing and potential. Therefore, competition between pipeline gas and LNG will grow, but locally. And if we talk about Europe, where such a collision is most expected, then an increase in LNG imports will compensate, first of all, a drop in domestic production and possible (albeit increasingly less likely) additional demand for gas. The trend towards aggressive substitution of pipeline imports, if it will be observed, will be only in individual countries (even in Poland, Russian gas will be replaced not so much with LNG as with pipeline gas from Norway), ” Belogoryev explained.
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