Medvedev discussing LNG supply to Asia-Pacific markets

Alexander Medvedev, Deputy Chairman of the Gazprom Management Committee, delivered a report “Gazprom in Sakhalin. LNG Supply to Asia-Pacific Markets” within the 18th Annual Conference “Sakhalin Oil & Gas 2014.”

Medvedev pointed out that the Asia-Pacific region was the world’s most rapidly growing and dynamically advancing gas market. According to estimates, before 2030 gas consumption will exceed one trillion cubic meters a year. Therefore, by 2030 Asia-Pacific will account for 25 per cent of the total global consumption of this energy source.

Natural gas will provide for the economic development of a number of Asian countries. Moreover, China where last year’s GDP exceeded the worldwide average GDP more than twofold will be a definitive growth driver in the region. Economic growth is a significant reason for such a substantial increase in natural gas demand in Asia, but it is not the only one. Another important reason is the necessity of maintaining the economic growth rates under the restrictions imposed on using nuclear power generation and more stringent environmental requirements. Asian countries, particularly China, try to systematically revise the structure of their energy balance in order to resolve grave environmental problems.

A high level of gas demand in Asia-Pacific can’t be satisfied by means of domestic resources. According to experts’ estimates, the aggregate import in the region – both in the key countries (China, Japan, South Korea, Taiwan, India) and new importers (Singapore, Indonesia, Malaysia, Thailand, the Philippines, Vietnam) – will grow from 270 billion cubic meters in 2013 to 530 billion cubic meters by 2030. Furthermore, almost 60 per cent of the required volume will be imported.

“Today Asia is the most attractive market for major players of the energy market. Its distinctive features include premium prices as well as an upward trend in long-term demand. It is worth mentioning that in this region gas is used everywhere, including the power generating sector, and this indicates the rational approach of these countries to their economies,” said Alexander Medvedev.

This year Gazprom made a breakthrough in developing the strategically important eastern direction. A 30-year contract was signed for supplying over one trillion cubic meters of Russian pipeline gas to China. It is the biggest contract in the entire history of Gazprom.

Presently LNG from the Sakhalin II project, where Gazprom is the majority shareholder is being exported to Asian countries, including China. Recently the plant with a capacity of 10 million tons a year hit a record output – over 50 million tons of LNG had been produced there since its commissioning in 2009. Today, the issue is being considered on constructing the third train of Sakhalin II. In addition, design and survey operations are underway for the Vladivostok LNG project, for which the Sakhalin gas production center will serve as a resource base. The plant with an annual capacity of ten million tons a year with the possibility of further expansion will be put onstream in late 2018 – early 2019.

“LNG is a highly competitive and promising product in the gas market. In fact, it is some kind of a flexible pipe able to be laid in any direction and for any distance. As of today, Gazprom delivers LNG to more than ten countries, including Japan, South Korea, China and Taiwan. Once the Vladivostok LNG and the Baltic LNG projects are launched, Gazprom’s share in the global LNG market will rise from the current 5 to 15 per cent,” said Medvedev.

It is also important that many possibilities are open to Gazprom’s LNG projects in Asian NGV markets, particularly in China, India, South Korea, Vietnam and Thailand. For instance, Chinese authorities support the conversion of motor vehicles to natural gas and introduce stringent environmental regulations. Nowadays, China is the biggest and most booming LNG market in the shipment segment. Natural gas is used more widely in public transport – six thousand CNG buses are in service in Beijing, and their number will grow.

“By now, Gazprom has created a solid foundation for large-scale and integrated expansion in the Asian market. A well-balanced combination of pipeline exports and LNG supplies as well as joint NGV projects will make a great contribution to the energy supply of the Asia-Pacific region and will reinforce Gazprom’s positions in the global energy market,” summarized Alexander Medvedev.

Press Release, September 24, 2014; Image: Gazprom