MOSCOW, April 25 (RIA Novosti) - This week Gazprom's board will discuss production plans for 2005.
A key issue will be the production and sale of liquefied natural gas, which is gradually replacing pipeline natural gas.
The Russian gas giant intends to break into the American market with LNG. This week a Gazprom delegation wrapped up a visit to United States, which had been made on the invitation from U.S. Energy Secretary Samuel Bodman and devoted to cooperation in LNG production technologies and supplies to the U.S.
America is one of the most promising LNG markets. Its own gas production does not meet the country's demand and imports need to be increased significantly. Since 2002, LNG imports to the U.S. have increased more than twofold and last year came to about 18 billion cubic meters. The U.S. Energy Department forecasts that by 2010 they may grow by several times, amounting to 67 million tons in 2015 and 85 million tons in 2020. Today, America has four LNG terminals with a total annual capacity of 45.8 billion cubic meters. There are plans to build another ten terminals on the East and West coasts, and annual capacity may reach 140 billion cubic meters of LNG.
Gazprom is aggressively targeting America and plans to launch swap LNG supplies to the US market in 2005: supplies of Russian pipeline gas to Europe will be exchanged for LNG supplied by American companies in the U.S. After 2010, it intends to start direct LNG deliveries to America under long-term contracts.
American energy firms have displayed great interest in LNG cooperation with Gazprom. The Russian monopoly has already signed memorandums of understanding with ChevronTexaco, ConocoPhillips and ExxonMobil. In compliance with them, the companies will study opportunities for Gazprom's participation in LNG regasification projects in North America, marketing gas supplies to the U.S., exchange operations involving North American gas pipelines, and the companies playing a role in LNG production in Russia. Apart from the American companies, Gazprom has also signed memorandums with Statoil, Hydro and Petro-Canada.
Gazprom has stepped up its efforts to identify sales markets after it starts developing the Shtokman gas condensate field on the Barents Sea shelf, which has reserves of about 3.2 trillion cubic meters. Gazprom experts have prepared a feasibility study on the pre-investment stage of a Shtokman LNG production project. It shows that gas from the field can be supplied to the U.S. at competitive prices. Within the next few months, it will make the final decision on the consortium to develop the field, which may include ConocoPhillips, ExxonMobil and ChevronTexaco, as well as the Anglo-Dutch Royal Dutch/Shell, British Petroleum and Norway's Hydro and Statoil.
Gazprom is pursuing aggressive marketing because of the growing competition for the U.S. LNG market. A week before the Gazprom delegation visited America, US Deputy Assistant Secretary for Natural Gas and Petroleum Technology James Slutz said at a Russian-American LNG seminar on April 12 that the market could not absorb all the LNG projects on offer. This means that Americans will choose the most efficient and profitable ones. After all, the choice is fairly wide. The main LNG exporters to the U.S. are currently Trinidad and Tobago, and Algeria. Yet the number of those willing to launch LNG supplies to America is growing fast. Producers in Venezuela, Peru, Nigeria, Angola, Egypt, Oman and Qatar have already announced plans to export LNG to the States. Australia recently said it also planned to become the main LNG supplier to America in the future.
The majority of Russian LNG projects (apart from Shtokman, there is Sakhalin, as well as projects on the Yamal Peninsula and in the Leningrad region) are obviously oriented toward only one consumer, America. Yet for all its promises, the U.S. market is competitive. You do not have to be an expert to suppose that, given the competitive environment, the global LNG market will have seen significant changes by the time most Russian projects are launched. First of all, LNG prices are expected to fall from the current $190-200 per 1,000 cubic meters as supplies grow and new facilities are built. Second, many large consumers, like the States, tend to diversify supplies. So LNG producers will have to make significant concessions when they sign new contracts or enter a new market.
Considering all the projects announced by oil and gas companies, Russia could export annually about 63 million tons of LNG since 2010. Even the growing U.S. market will obviously not be able to absorb this amount. Apparently, cutting its way for future supplies to America, Gazprom will have to work in the East as well, first of all in the Asian-Pacific region. There it will also encounter competition, but the fast-growing economies of China, India and South-East Asian countries makes them equally attractive energy markets.
Igor Tormberg, Candidate of economic sciences, leading research associate at the Institute for International Economic and Political Research of the Russian Academy of Sciences.
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