Russian LNG Aims High, Leveraging Big Reserves and Logistical Advantages

Abstract

Russia’s market influence as an exporter of liquefied natural gas (LNG) is growing, possessing the world’s largest reserves of natural gas and the logistical options to deliver it at competitive prices to Asia and Europe along the now-navigable Northern Sea Route (NSR). The country became a player in the LNG market when it shipped its first cargo in 2009 to Japan from what was then Russia’s first offshore gas project, Sakhalin-2 in the Far East, operated by Sakhalin Energy Investment Company Ltd. and owned by Russia’s pipe-line gas monopoly Gazprom (50% plus one share), Shell (27.5% minus one share), and Japan’s Mitsui (12.5%) and Mitsubishi (10%). Sakhalin Energy operates three oil and gas platforms producing its current resource base from the Piltun-Astokhskoye oil field and the Lunskoye gas field off the northeastern coast of Sakhalin. To date, Sakhalin Energy has sold all the LNG produced at its 11.49-mtpa-capacity Prigorodnoye LNG production complex on the southern tip of Sakhalin Island, under long-term contracts to buyers in the Asia Pacific and North America, according to Shell’s website. In 2024–2026, the partners say they will add a third train to expand capacity by 5.4 mtpa, though they have repeatedly delayed this expansion for years due to a lack of investment capital to develop a new resource base and low gas prices in Asia. The same holds true for Gazprom’s plan for an LNG plant near Vladivostok. However, the market has now changed with rising demand for gas to replace coal, giving gas producers an incentive to invest into new E&P gas projects and mid-to-downstream megaprojects like those for producing LNG. https://jpt.spe.org/compared-to-last-year-gas-prices-are-looking-good In 2018 and again this past January, European spot gas prices spiked on Gasunie’s leading TTF (title transfer facility) virtual trading platform and other European trading hubs when Asian gas markets began offering high premiums to divert LNG cargos from Europe, according to the EU Commission’s latest European Gas Market report. The Rise of a Russian IOC—Novatek in Yamal Russia’s largest independent natural gas producer Novatek was Russia’s second entrant into the LNG market when its Yamal LNG project rose above the permafrost atop an estimated 65,000 piles on the Yamal Peninsula, home to Russia’s largest gas deposits and the source of Russian pipeline gas sold into Europe. Yamal LNG shipped its first cargo (170000 m3) in December 2017. It then upped the ante with exports from a second train in August 2018, and added a third train in November 2018, according to Novatek’s website. Situated on the South Tambeyskoye field on the coast of Ob Bay, the plant boasts a capacity of 17.4 mtpa.