Page 5 - GLNG Week 36

GLNG COMMENTARY GLNG
Target markets
Russia is already the world’s largest exporter of natural gas and the second-biggest in terms of crude oil. It accounted for 8% of the global LNG market in 2018, and is targeting 20% by 2035. Russia will be pursuing this goal at the same time that new LNG export capacity is coming online, especially in the US and Australia. Nonetheless, demand is anticipated to outpace supply by 2023, and Russia is among the countries racing to meet the shortfall.
Asian markets will be targeted for around 80% of Arctic LNG-2’s output. The strategy appears timely, given China’s implement dis- placement of Japan as the world’s largest LNG importer.
“ e recent shi in Novatek’s strategy to gain access to end-consumers and LNG infrastruc- ture in Asia is a wise decision given growing volatility in global LNG spot prices, in our view,” analysts from Russia’s Sberbank wrote in a note last week. “ e company seems to be targeting partnerships and joint investments in infrastruc- ture projects in key LNG-consuming markets, one of which is India. ough no binding agree- ments or commitments have been signed yet, we consider expansion of marketing and infrastruc- ture JVs an important factor for the long-term development of the LNG business.”
Novatek’s announcement also comes as the US-China trade war shows no signs of ending. Indeed, in the short term, the LNG expansion plans of US operators have taken a hit. The uncertainty over when the dispute could be resolved puts LNG projects outside the US at an advantage, as they are able to sign up Chinese investors more easily. And in a glutted LNG market in which it is increasingly important to underpin new projects with long-term o ake deals, the growing interest from Chinese buyers
is playing an increasingly signi cant role. Arctic LNG-2 is an example of this, given the participa- tion of both CNPC and CNOOC.
However, it is not China alone that devel- opers such as Novatek are targeting. Last month, Russian Deputy Energy Minister Anton Inyutsyn said Novatek was interested in supplying gas from Arctic LNG-2 to Indian companies. Indeed, India’s demand for LNG is also rising. However, Indian Minister of Petro- leum Dharmendra Pradhan said recently that the country’s long-term contracts for LNG supplies would be reviewed in order to bet- ter re ect falling spot prices for the fuel. Rus- sia appears to be set to bene t from growing Indian LNG demand, though, and the two countries are preparing to set out a ve-year plan on energy co-operation.
Tapping the European market could be more complicated, given that a number of countries there are trying to reduce their dependence on Russian gas. Nonetheless, with the agreement for Russian gas to transit through Ukraine expiring at the end of this year, Moscow is looking for alternative routes for sending gas to Europe. It has been confirmed that more talks between the European Union, Russia and Ukraine on the issue will take place later this month, but a renewal of the gas transit agreement is not yet guaranteed. In the meantime, Russian e orts to diversify gas supply routes to Europe persist.
Arctic LNG-2 is well placed to serve both Asia and Europe, and given the exibility of LNG shipments compared with contentious major gas pipeline projects, such shipments could prove attractive for European buyers as well as those in Asia. Competition is intensifying in the global LNG market, but if demand projections for the coming years play out, Arctic LNG-2 will be coming online at a good time to bene t.™
Novatek’s announcement also comes as the US-China trade war shows no signs of ending.
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