Page 97 - RusRPTFeb19

Russian gas giant Gazprom is mulling different options for the extension of the transit stretch of the Turkish Stream (TurkStream) pipeline to Europe, Russian President Vladimir Putin was cited by Serbian media on January 16. The pipeline currently runs from Russia to Turkey and is one of the most important energy projects for the wider region, replacing the cancelled South Stream project. “One of the options is the transit stretch to run via Bulgaria, Serbia and Hungary,” Putin said in an interview with Politika, released a day before his visit to Serbia. “In that case, Serbia will not only use the Russian gas, but will also serve as a transit country. That will strengthen the energy stability, not only in Serbia but also in central and southeast Europe,” Putin said. The European Commission will be consulted for the final decision on the Russian gas delivery through Turkish Stream.
● Novatek
Russian gas producer Novatek is revving up to launch its third LNG project, Arctic LNG-3. A subsidiary of Russia’s biggest independent oil and gas company Novatek, Novatek-Yurkharovneftegas, has registered a new company, Obskiy LNG, which analysts believe will be the operational company to carry out Novatek’s next large scale liquid natural gas (LNG) project through to 2030, Kommersant reported on January 16. Arctic LNG-3, on the North- Obskoye field and with capacity of 13.2mmt/a of LNG, is the likely to be Novatek’s next, large-scale LNG project, the paper reports. Separately, Vedomosti writes that the growth in the demand for imported gas in China has exceeded analysts’ expectations. In 2018, China imported 53mmt of LNG. The share of LNG imports increased to 59% in 2018, from 47% in 2016 and 56% in 2017. China’s total gas imports reached 90.4mmt, or 124.8bcm, in 2018 (31.8% y/y growth). “The company’s strategy through 2030 implies LNG production increasing to 70mmt/a. Novatek has announced the discovery of at least 320bcm of natural gas reserves (under Russian reserve classification) after testing the first exploration well at the North-Obskoye licence area in October 2018. During the 3Q18 results conference call, management noted that there was significant upside potential from developing the North Obskoye field,” Dmitry Loukashov
A report from Vygon Consulting warns that Russia may only account for 6.8% of production on the global LNG market by 2025, far under the 15% target set by MinEnergo. Sanctions impacts are working to constrain Russian firms. Despite the good news of Saudi interest in Novatek's Arctic LNG project, no major expansion of Russian LNG train capacity by any firm - Novatek, Gazprom, or Rosneft - is on schedule to be completed by 2022-2023 when LNG markets are expected to again face a deficit. Australia has an advantage for transport costs to Asia-Pacific consumers as well as scale for shipping against Novatek, and the US accounts for 51% of the 92 million tons of projected LNG capacity coming on stream from 16 major International projects. In short, Russia's oil and gas sector will have a harder and harder time catching up to and competing with others' market share.
● Novatek reportedly needs prices at $3.80/MBTU to operate its projects without loss, easily achievable given demand and prices in Asia.
● Gazprom's Baltic LNG project does not yet have any project documentation, still stuck after over 10 years of back and forth.
● The developing surplus of LNG supplies - a short-term phenomenon - has been tempered by a lack of transport capacity, preventing a large price drop globally.
97 RUSSIA Country Report February 2019 www.intellinews.com