Russian lawmakers pave way for Gazprom's rivals to export LNG

Reuters

* Law expected to come in force in 2014

* Russia has 4.5 pct of global LNG market

* Seeks to double market share by 2020

* Rosneft, Novatek pre-sold some LNG from future plants

By Katya Golubkova

MOSCOW, Nov 15 (Reuters) - Russia's lower house ofparliament took a first step on Friday towards allowing rivalsof state-controlled Gazprom to export liquefiednatural gas (LNG), as the world's top energy producing nationstakes a claim to growing Asian markets.

The bill would open the door for Russia's top independentgas firm Novatek and state oil major Rosneft to break Gazprom's monopoly on gas exports - but only for thesupercooled gas that is shipped by tanker.

It passed by an overwhelming majority at the first readingand is expected to clear parliament quickly. Depending on whenPresident Vladimir Putin signs it, the measure may take effectfrom January.

Prime Minister Dmitry Medvedev, a former Gazprom chairman,told the government last month that the export reform would give"a new chance for the whole energy industry and allow us to gaina footing" in fast-growing Asian markets.

Gazprom, descended from the Soviet gas ministry, has had itsexport monopoly enshrined in law since 2006. It sells gas mainlyby pipeline to Europe and, despite years of talks, has failed toclinch an export deal to China.

It has also been slow to adopt new gas technology, onlyentering the LNG business in the past decade by buying into theRoyal Dutch Shell-led Sakhalin-2 project, on thePacific island of Sakhalin close to Japan.

Because of Sakhalin-2, Russia now has a share of around 4.5percent of the global LNG market, which is dominated by Qatar.Russia aims to double its share by 2020 to produce 35 million-40million tonnes a year by then.

Industry analysts say Gazprom has been reluctant to embracechange because of the risk that its existing business would becannibalised by LNG, which in contrast to pipeline gas can bedelivered to multiple destinations.

"This law is essential for as many players as possible toenter the market in addition to Gazprom," said Alexei Kokin, anenergy analyst at Moscow brokerage Uralsib. "It would have beenbetter if it had been passed a year or two ago."

Russia's first new plant, the Novatek-led Yamal LNG, is dueto come on stream in 2016 and produce 5 million tonnes - laggingnew supplies from Australia and the United States expected toreach the Asian market.

"Major Australian projects should start to hit the market inthe second half of 2014, but we continue to see a dearth ofnew liquefaction projects coming online until 2015," BofAMerrill Lynch said in a note this week.

Both Novatek and Rosneft have already pre-sold LNG fromtheir planned plants to Asian buyers, teaming up with otherenergy majors like ExxonMobil, Total or ChinaNational Petroleum Corp.(CNPC) to share costs and deployadvanced technologies.

"We are not going to compete with Gazprom in Europe,"Gennady Timchenko, a co-owner of Novatek, has said of the YamalLNG project on the Yamal peninsula north of the Arctic Circle.

BUYER IS KING

Russia has ceded its position as the world's top gasproducer to the United States, which is undergoing an energyrevolution in which wells are 'fracked' to release gas trappedin non-porous rocks such as shale.

With the U.S. gas market now in surplus and pricesdepressed, the industry has pushed for the right to export tohigher-priced foreign markets such as Japan, facing an energyshortage following the Fukushima nuclear disaster of 2011.

Industry experts say U.S. exports of LNG could start in2015, competing with Qatar, Malaysia and Australia and bearingdown on international prices.

The bulk of new projects are targeting Asian markets, whereJapan is the world's top LNG importer.

China, which is the world's top energy user and is keen tocurb use of dirtier coal, will likely triple the use of naturalgas to top 300 billion cubic metres (bcm) by 2020 and nearly athird of that would be imported.

In a sign of intensifying competition, Qatar recently cutits prices, while over $190 billion of LNG export projects underconstruction may help Australia become the world's top exporterbefore the end of the decade.

View Comments (4)