Page 6 - AsiaElec Week 37

AsiaElec COMMENTARY AsiaElec
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.
“The recent shift 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. “The company seems to be targeting partnerships and joint investments in infrastruc- ture projects in key LNG-consuming markets, one of which is India. Though 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 offtake deals, the growing interest from Chinese buyers
is playing an increasingly significant 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 develop- ers such as Novatek are targeting. Last month, Russian Deputy Energy Minister Anton Inyutsyn said Novatek was interested in supply- ing gas from Arctic LNG-2 to Indian companies. Indeed, India’s demand for LNG is also rising. However, Indian Minister of Petroleum Dhar- mendra Pradhan said recently that the country’s long-term contracts for LNG supplies would be reviewed in order to better reflect falling spot prices for the fuel.
Russia appears to be set to benefit from grow- ing Indian LNG demand, though, and the two countries are preparing to set out a five-year plan on energy co-operation.
Tapping the European market could be more Novatek’s
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 trade war shows 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 efforts to diversify gas supply routes to Europe persist.
Arctic LNG-2 is well placed to serve both Asia and Europe, and given the flexibility 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 benefit.™
announcement also comes as the US-China
no signs of ending
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w w w . N E W S B A S E . c o m Week 37 17•September•2019