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Gazprom Considers New LNG Plants Targeting Chinese Market

LNG Vessel

Gazprom is looking into constructing small-scale liquefied natural gas (LNG) plants in eastern Russia in order to better serve the Chinese market.

Igor Maynitskiy, Head of the LNG Export Division for Gazprom Exports, said in the latest issue of Gazprom’s corporate magazine that the company is carefully examining the development of the small-scale LNG market in China. If the market is promising then Gazprom could build small-scale LNG projects in the Far East region of Russia, which shares a border with China and reaches the Pacific Ocean.

According to Gazprom’s website, the Far East region is vital to the company’s “strategic interests”. The firm claims the area has “favorable geographical preconditions” for discovering an exploring new gas fields and also has the strong potential for natural gas “production and stockpiling.”

Gazprom currently runs four export-oriented small-scale LNG plants in Russia but none in the Far East. Their projects in the Far East, such as Sakhalin II, where Russia’s first LNG plant was built are all large-scale.

Russian government data cited by Gazprom estimates some 52.4 trillion cubic meters of natural gas onshore in the Far East along with 14.9 trillion cubic meters offshore.

Aside from keeping an eye on China, Maynitskiy admitted Gazprom Export’s primary geographic area of interest is the European market. He noted that small-scale LNG infrastructure already exists in Europe, and stricter legislation on shipping emissions in the Baltic and North Sea zones will help stimulate the development of small-scale LNG in Europe. Nonetheless, Maynitskiy said Gazprom wants to expand into other areas.

Credit rating agency Fitch on July 12th warned that Gazprom’s 33 percent market share in Europe is under threat by lowered regional demand along with more competition from other natural gas and LNG exporters. Gazprom enjoys low costs in production and transportation as well as excess production capacity. Yet Fitch warned that the extent of Gazprom’s possible market share loss depends on what steps the firm takes over the next few years.

By Erwin Cifuentes for Oilprice.com

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