Russian authorities in course of the following month plan to define about liberalization of condensed natural gas (CNG) export.
However, Russian government has not definited single line on this issue yet. Experts warn that decision on withdrawal of CNG export from Gazprom monopoly should be taken already now, as otherwise in the following 5-10 years Russia risks to lose a share of the world market, letting it to foreign companies. Thus, Australia is getting ready for active attack of the market.
The main problem to be solved in case of export liberalization – is the probability of competition of Russian companies with each other and reduction of gas price as a consequence. But there are options to avoid such effect, also including state regulation.
Gazprom export monopoly is established by the law “On Gas Export”: according to it, only the state gas group of companies or its 100% affiliates possess the export right. Such exclusive right in the Russian Federation belongs to OOO “Gazprom Export”. The issue of cancellation of such conditions at the moment is only about condensed gas: independent manufacturers can be granted the right to export it on their won.
In December 2012 according to unofficial information in Mass Media the Ministry of Energy, Natural Resources, Economic Development and also State Anti-Monopolist Service have already presented positive reports for the corresponding suggestions.
On February 13th I. Sechin the Head of Rosneft company supported this suggestion, specifying that only at the shale fields, obtained by Rosneft, natural gas stocks are estimated in the amount of 21 trillion cubic meters, and such scopes due to objective geographic and infrastructural reasons can be supplied to the domestic market. This was followed by the order of the President of the Russian Federation Vladimir Putin to think over gradual liberalization of CNG export. However, since then specialized bodies postpone presentation of official line on this issue.
In February Vice Prime Minister Arkadij Dvorkovich reported that a consolidated line of the government on this issue can be presented till the end of March 2013, however, the terms shift, as the Energy Ministry is still processing the order of the President and plans to finish the export scheme for condensed gas within a month.
As the experts of the world gas market underline, Russia claims to remain the biggest gas state in the world and the biggest gas exporter. By this in last 10 years CNG export has developed rapidly and now in the while world it comprises about half of those scopes being exported through the pipelines. In this respect gap within CNG export deprives Russia of additional profits from gas export, impedes turning it into a global player of the world trade, and is the proof of technological underdevelopment.
Now Russia takes the first place in the world in pipeline gas export: in 2011 207 billion cubic meters of gas were exported or about 30% of the world export of pipeline gas. By this within the world CNG export the share of Russian comprised only less than 4%. On this value Russia takes the eighth place in the world after even such countries as Nigeria and Malaysia. By this, considering the capacities of gas condensing units, the Russian Federation takes the 10th place. Let’s note that according to the Federal Customs Service (FCS) in 2012 CNG export scopes in the Russian Federation reduced for 6% comprising 21.4 million versus 22.8 million tons a year earlier.
Except for that, condensed gas trade has experienced serious changes in recent years, related to the shale revolution in the USA. A huge amount of projects was constructed in the USA in this sphere, and regarding that the country started to produce a big amount of cheap own shale gas, CNG import should have comprised 70 billion cubic meters, in 2011it covered only 10 billion cubic meters, 2 billions of which the country reexported. Thus, net import comprised 8 billion cubic meters, which is almost 10 times less than was expected 5-6 years ago. Together with that increases the number of states, interested in CNG import. 30 states have terminals to receive CNG, 24 more countries plan and analyze the option of their construction. This means, that CNG supplies geography shall expand with no doubts. But possessing almost one fifth of world gas stocks, Russia still takes the leading position.
Thinking of CNG supplies extension prospects, it’s also worth to note the following advantage of condensed gas: in case of long-distance supplies pipeline export become less profitable, than export by sea in methane-tankers. Now they become bigger, the average capacity of already now building tankers is about 160 thousand cubic meters. And the maximum distance for CNG transportation from producer to the consumer was about 24 thousand km.
Considering stagnations in the EU states and shale revolution in the USA additional scopes of condensed gas first of all should be forwarded into the states of Asian-Pacific region, which gradually become the main CNG consumers in the world. Russian companies will have to withstand a powerful competition from the USA, where the CNG capacities potential – 164 million tons annually by 2019 and Australia. By this transport options of Russian CNG export here are more limited as they have to go through Suez Canal or along the North Sea Way which is complicated with ice situation in the region.
The experts outline potential competition for Russian companies with Australian ones. By this it is underlined, that in prospect contracting and selling the biggest gas scopes shall be possible approximately between 2018 and 2022. Of Russia doesn’t manage to do that Australia, which accomplishes big-capacity projects, shall take the place of Russian producers. This country in prospect can become the main CNG exporter. Except for that, supplies from other sources shall start. For example, recently African project on gas production at Mozambican shelf plate has appeared, which can supply to Asia already starting from 2018.
This problem is recognized also by Russian authorities themselves. Russia needs to assure presentation of Russian CNG to the markets of Asian-Pacific region till 2018. According to many experts, offer shall exceed demand and already CNG factories are being constructed. By this, the states of Asian-Pacific region, including Japan, have announced their plans to increase the scopes of CNG import from Russia. And Australia is going to increase its capacities on CNG production for 40 million tons. Now in general in the whole world, according to experts’ estimations, 260 million tons of CNG is produced. And the rates of its production growth are very high. By 2020 there will be 360 million tons of CNG produced, and in 2030 – 440 million tons.
Regarding possible scopes of condensed gas production in Russia, than after 2018 they can comprise 41-46 million tons annually. Speaking about potential future CNG export scopes from the Russian Federation, it’s hard to predict those due to high level of indefiniteness regarding shale resources of Rosneft.
At the moment, in Russia operates the only CNG production factory – Sakhalin-2, the main shareholder of which is Gazprom. The factory’s capacity comprises 9.6 million tons annually with technological ability of production scopes increase for 15%. In case of the decision on CNG export liberalization, the main beneficiary would be NOVATEK, accomplishing together with French Total of the project on factory construction in Jamal – Jamal SPG. Now NOVATEK plans to perform supplies from Jamal SPG through agent agreement with Gazprom, which was signed in June 2010, however, it is actively getting ready to the possible cancellation of Gazprom export monopoly. Foreign companies also express their interest in this project, including Chinese and Japanese ones.