21st World Petroleum Congress – Gazprom Keen to Become Key Gas Supplier in Asia

By Bojan Soc, June 19, 2014

Gazprom, the world’s largest natural gas producer and exporter, is eyeing Asia’s growing LNG market and strives to become one of key LNG suppliers in the region, Gazprom deputy chairman of the management board Alexander Medvedev told the World Petroleum Congress in Moscow Tuesday.

In recent years, Russia has stepped up efforts to expand its presence in Asia’s energy market and growing demand for LNG in this part of the world has spurred Moscow’s hopes for establishing itself as a major player here.

Calling LNG the “most dynamic segment of gas trade,” Medvedev focused his speech on the “region that drives and leads global demand of this fuel – Asia.”

According to Medvedev, Asia is the world’s largest LNG consumer accounting for 75 percent of the global LNG trade and its share in the global energy trade has increased by 20 percent over the last five years. “Last year, Asia imported about 178 million tons of LNG, which is over five times more than Europe did,” he said, adding that the fast pace of growth of regional economies requires gas as the most reliable and cleanest energy source.

Speaking about the Asian market’s attractiveness, Medvedev mentioned its dynamics, but also put an emphasis on pricing.

“Today, the prices for LNG in Asia are 40-60 percent higher than in Europe under term contracts and up to two times higher than on the spot market. The effect of the Asian premium stimulates gas traders to divert LNG cargoes from Europe to Asia. Since 2010, volumes of short-term and spot LNG imported to Europe have decreased 20-fold. During the same period Asia has managed to increase volumes of LNG delivered under the flexible contracts by 20 percent. Asian dragon will continue flying high!” the executive said.

According to energy analysts’ forecasts, Asia is bound to become the world’s largest gas consumer in 20 years and China shall record the largest increase in the gas demand in any single country. By the middle of the 2030s, China’s gas consumption will skyrocket to more than 500 billion cubic meters per year, Medvedev said, citing the latest IEA forecast. According to the same expert outlook, India’s gas consumption is expected to grow up to 170 billion cubic meters per year by 2035. “Some of these huge incremental needs will be satisfied by the imported LNG,” the Gazprom official said.

Referring to Russia and Gazprom as “still emerging, but ambitious players on the Asian gas market” Medvedev said that Gazprom’s LNG plant on the Sakhalin Island has safely and uninterruptedly produced and delivered to consumers over 50 million tons of LNG since 2009. Today, Sakhalin-produced gas accounts for 10 percent of Japan’s LNG imports.

Within the same context, the recent Russia-China gas deal, which has been dubbed by some industry specialists as “contract of the century,” has seen Moscow “open for the first time in history the door for East Siberian natural gas to the gas market of the future, the Chinese market.” Under the 30-year contract