MOSCOW: The Russian government took aim yesterday at Gazprom’s 25-year monopoly on gas exports by laying the groundwork for other companies to begin their own sales to energy-hungry Asian markets.
The draft legislation backed by Prime Minister Dmitry Medvedev’s cabinet allows state-held Rosneft and privately-run Novatek to ship liquefied natural gas (LNG) to foreign clients for the first time.
The measure also preserves Gazprom’s stranglehold on pipeline gas exports that are primarily destined for Europe.
“This is a very serious decision that, to a certain extent, does away with the monopoly on exports,” Medvedev told a televised government meeting.
Both houses of parliament are expected to pass the legislation in time for President Vladimir Putin’s signature later this year.
The proposed measure underscores the government’s desire to protect Russia’s status as top natural gas exporter in the face of growing competition from North American shale.
But it also signifies the state’s displeasure with Gazprom’s failure to kick-start stalling production or agree contracts with countries such as China that could expand Russia’s energy client base. Both Rosneft and Novatek have been the rising stars of Russia’s tightly-regulated energy market in the past 10 years.
Top crude producer Rosneft is trying to build up its stake in the natural gas market as part of a strategy to become a global major that could compete with the likes of US super-giant ExxonMobil.
Novatek meanwhile has rapidly grown into Russia’s largest independent natural gas producer and is grabbing a growing share of the domestic market. Both companies are eager to launch lucrative LNG deliveries to countries ranging from Japan to India and South Korea — a drive that Gazprom has been trying to block.
The draft legislation covers energy companies in which the government either owns the majority stake or which have plans to build gas liquefaction facilities near fields they already own.
The first provision covers Rosneft while the second concerns the $20bnn (¤14.5bn) Yamal LNG project in which Novatek is partnered by France’s Total and China National Petroleum Corp (CNPC).
Russian Energy Minister Alexander Novak said the government had no immediate plans to open up LNG exports to other players. “There is no need to talk about this now,” Interfax quoted Novak as saying.
Analysts see Russia now trying to correct mistakes of past years when the state rigorously protected promising fields from foreign involvement.
The policy ended up withholding vital technological know-how from local firms and ended up seeing Russia being slow off the mark in both the fast-developing LNG and shale sectors.
Researchers at ETH Zurich university put Russia’s LNG production total for last year at 15 billion cubic metres — just five percent of the global total.
Yet predictions from the Oxford Institute for Energy Studies see Asia’s annual demand for LNG ballooning to 300-400 billion cubic metres by 2025.
“Any delay implementing (new LNG) projects may result in Russia losing an opportunity to build up a significant position on the Asia market at the expense of more active competitors—Qatar, Australia and the United States,” ETH Zurich said in a report.
AFP
