Power generation, transport to push gas growth, Gazprom’s head says

Growing role of gas in the global energy mix is to come primarily from power generation and transport, Gazprom’s head Alexey Miller said.

Speaking at an economic forum in St. Petersburg, Miller said that in regards to power generation, it is a “cost-effective and viable alternative.” 

“The internal rate of return for combined-cycle projects averages 14 to 15 percent,” Miller said, adding that “combined-cycle units at gas-fired power plants can be set up extremely quickly.”

In terms of use of gas as fuel for transport, Miller said it provides considerable savings for the consumer thanks to reduced costs.

This is why in absolute terms natural gas consumption will grow in the global energy mix until 2035. Its share will expand, allowing it to catch up with oil or even overtake it. This will occur primarily in the power generation and transport sectors.

In this way, natural gas will be a strategic growth driver for Russia in the coming decades.

“Of course, our gas industry will be chiefly influenced by the proximity of the two largest and most dynamic markets, Europe and China,” Miller said.

He noted that the European market is showing a five percent increase in demand as the domestic production is in decline. In the Chinese market, the demand grew by over 15 percent in 2017, showing the highest numbers in the last few years. Gas imports added almost 30 percent. In 2017, China consumed 237 billion cubic meters of natural gas.

Miller adds that the goals set by China for 2020 look quite realistic: to raise gas consumption to 360 billion cubic meters and to increase its share in the country’s energy mix from 7 to 10 percent.

China is expected to split its imports of natural gas to 50 percent for pipeline imports and liquefied natural gas (LNG) imports, each.

“Given China’s economic growth and the increase in consumption, the demand for LNG will rise as well. Our estimates by 2035: 150–180 billion cubic meters for gas and 110–130 million tons for LNG. It means that China will account for some 30 percent of the global LNG market growth,” Miller said.

Miller noted that it will start piping Russian natural gas to China via the Power of Siberia gas pipeline on December 20, next year.