Statement by Gazprom Management Committee Chairman Alexey Miller at the Conference “Development of LNG and its Impact on the European Gas Markets”
Annual General Meeting of the European Business Congress
Esteemed colleagues!
Our Conference is dedicated to one of the most important elements of the modern energy market – liquefied natural gas (LNG).
Within a relatively short period of time LNG has become a highly marketable commodity worldwide, and nowadays it significantly influences the global and European gas markets.
Over the last decade we have observed a fast pace of LNG production and consumption worldwide.
Since 2001 the global installed capacities of LNG production and the demand for this product have risen by 70 per cent. Despite a slight decrease last year, in 2013 the growth will resume and will be sustainable in the mid and long term.
The flexibility of LNG transportation makes it possible to open new untapped markets for natural gas and, as a consequence, contributes to increasing the natural gas share in the global energy mix.
Being the world’s leading gas Company, Gazprom continuously pursues its LNG production and supply strategy.
Being the world’s leading gas Company, Gazprom continuously pursues its LNG production and supply strategy.
We operate one of the most remarkable projects in the entire history of the LNG industry – Sakhalin II. In 2012 the actual output exceeded the existing capacity and totaled 10.8 million tons.
Moreover, we are successful in developing LNG trading and transportation. Over a relatively short period of time we have become a full-fledged player in the international LNG market and enjoy the confidence of customers. Gazprom currently supplies LNG to 10 countries.
Gazprom Group’s LNG volumes underpin our leadership positions in pipeline gas sales and provide additional competitive advantages to our business, inter alia, due to swap transactions and supply optimization.
Gazprom Marketing & Trading is responsible within Gazprom Group for LNG marine transportation. At present, we have chartered 3 LNG carriers. In the course of a year, 4 modern high-performance vessels will be added to our fleet.
We have already launched a new project for large-scale LNG production.
We have already launched a new project for large-scale LNG production.
It is the Vladivostok-LNG project that has particular advantages due to the vicinity to the ‘premium’ Asian markets and utilizes gas from a new gas production center in the Russian East.
As part of the project, an LNG plant will be constructed on the Lomonosov Peninsula. The plant will have three process trains with an annual capacity of 5 million tons of LNG each. The first train will be put onstream in 2018.
Besides, in the near future we will announce another totally new LNG project.
Besides, in the near future we will announce another totally new LNG project.
Having mentioned Gazprom’s activities in the LNG sector at the beginning of my statement, I would like to elaborate on the main trends of the LNG industry in the European market.
LNG is extremely important for supply diversification and European energy security strengthening. Gazprom Group is ready to supply LNG to European niche markets.
It needs to be stressed that the ratio of imported pipeline and liquefied natural gas in Europe (roughly 1/4) hasn’t changed dramatically as was expected.
The market practice showed that the growth of LNG supplies to Europe fell considerably behind the estimated figures. It resulted in the reduction of the European share in the global LNG import from 28 per cent in 2009 to 21 per cent in 2012.
This means that for many reasons pipeline gas supplies are more important to Europe than LNG supplies.
This trend was also present in the first quarter of 2013. While Gazprom was building up its LNG supplies to Europe, other players, primarily LNG suppliers, dramatically reduced their volumes. LNG producers found more favorable conditions in other regions of the world.
In this way, in the first quarter of 2013 Gazprom’s gas supplies to Europe grew by 6.4 per cent, while the supplies of other players declined: Algeria – a 10 per cent fall, Libya – a 12.9 per cent fall, Qatar – a 42.3 per cent fall. Despite the forecasts, gas from the Middle Eastern LNG producers wasn’t evenly distributed between the North American, European and Asian markets, but was re-oriented towards the Asian market.
Despite the forecasts, gas from the Middle Eastern LNG producers wasn’t evenly distributed between the North American, European and Asian markets, but was re-oriented towards the Asian market.
Another important tendency should be highlighted as well.
Experience shows that spot LNG cargoes uncontracted in the Atlantic Basin markets are usually transformed into supplies under mid- and long-term contracts when redirected to the Asia-Pacific region.
In other words, the trend towards the outflow of some LNG volumes from the European market is not temporary or seasonal, it becomes increasingly continuous and is set in the relevant purchase and sale agreements.
As regards the long-term prospects for the European gas market development, the forecasts vary. According to the consensus forecast, the gas demand in Europe is expected to grow and the indigenous gas production will fall in the long run, thereby creating additional demand for imported gas. This demand will be met primarily with pipeline gas.
According to the consensus forecast, the gas demand in Europe is expected to grow and the indigenous gas production will fall in the long run, thereby creating additional demand for imported gas.
At the same time, we expect a considerable increase in small-scale LNG consumption in Europe, first of all, by marine and road transport. The increase will stem from elevated prices for conventional vehicle fuels and toughening European air emissions standards.
By 2030 LNG consumption by European transportation facilities may exceed 30 million tons per year in total, i.e. over 40 billion cubic meters annually.
Gazprom is ready to promote the NGV sector particularly by developing the LNG storage and sales infrastructure, as well as by offering in collaboration with car makers LNG conversion kits for buses and trucks of transport companies.
In conclusion I would like to reiterate the key points:
- LNG supplies to Europe were lower than the estimates – therefore, pipeline gas supplies are still important;
- LNG supplies from existing and new projects are oriented towards the Asia-Pacific region;
- Gazprom Group is also focused on the Asia-Pacific markets while implementing its new large-scale LNG projects;
- in contrast to large-scale LNG, small-scale LNG is rapidly developing in Europe and Gazprom Group is ready to take the appropriate efforts for its development.