Russian Parliament Opens Asian LNG Export Market to Competition

Russia’s lower house of parliament has given its full approval for new laws that would allow rival companies to export liquefied natural gas (LNG) to Asian markets, ending Gazprom’s long standing monopoly.

The decision was made in order to help Russia take advantage of the growing Asian market, spurred by Japan’s move to LNG after dumping nuclear power, and China’s efforts to reduce coal consumption in order to lower pollution. Russia plans to double its share of the global LNG export market to 10 percent by 2020.

The new laws will allow Novatek and Rosneft to complete their LNG export projects in order to provide competition to Gazprom, as well as allowing the state-owned Zarubezhneft oil company to export LNG, although it currently has no LNG production facilities in the pipeline.

The law then bars any other companies from entering the market. They effectively only opened the gates to allow three new companies in, quickly closing them again after.

Related article: Russia Opens LNG Floodgates

The new companies will only be allowed to export LNG via tankers and are forbidden from all competition in European countries that Gazprom already supplies, meaning that Gazprom will remain in control of the European market and be the sole company allowed to export via pipeline.

The laws will not take effect until January, first needing approval from the upper house of parliament and the signature of President Vladimir Putin, but the approval from the lower house of parliament is enough to secure finance for projects and start selling LNG on future contracts.

Russia is actually very late to the LNG game and now lags behind its foreign rivals, lacking in both production capacity and expertise. In order to have a chance of capturing a large share of the Asia-Pacific LNG market Russia must rapidly progress its LNG output and export volumes to match the likes of Qatar, Australia, the US, and some African nations.

Jonathan Stern, a senior research fellow at the Oxford Institute for Energy Studies, said that “Russian LNG in Pacific has a lot of advantages but ... it is very, very late except for Sakhalin-2. The Australian projects are further advanced, African projects are further advanced and Russian projects will have to move very, very quickly now if they are going to find a market.”

By. James Burgess of Oilprice.com