Russia to become a Major LNG Producer within a Decade

Leonid Mikhelson, the chief executive and co-owner of Novatek, has predicted that Russia will become one of the top LNG producers in the world within the next ten years, matching even the likes of Qatar, the current top producer.

Reuters claims that over the past decade Novatek has grown from a mid-sized producer into the second largest gas company in Russia behind Gazprom, with a market capitalisation of $40 billion, and producing enough gas to meet the demand of a country the size of Italy.

Mikhelson stated that Novatek expects to increase their natural gas production volume by 7-8 percent this year, and for liquids output to grow by 40-50 percent as new fields come on line.

“In Russia we have LNG projects being developed by us, Gazprom and Rosneft. It would be a mistake to think that all these projects will be competing with each other.

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Given the expansion of LNG markets, Russia could have twice as many projects as it has today and those volumes would still find their customers. On a 10-year horizon, Russia simply must build up to 80 million tonnes of LNG capacity.”

One problem standing in the way of Mikhelson’s prediction is the fact that Russia, despite its wealth of reserves and vast production facilities, has only one LNG export facility on the Pacific Island of Sakhalin. To try and rectify this Novatek are planning a major Arctic LNG project known as Yamal LNG, on the Yamal Peninsula. Other LNG plants are also being discussed by other companies on both the Pacific and Atlantic sides of the country.

Other countries, such as Australia, the US, and East Africa are also predicted to massively increase their LNG export levels over the next decade, leading some experts to predict a glut in the market and subsequent price collapse for the fuel.

However Mikhelson stated that he was confident demand would outpace production, avoiding any supply glut. “There is big competition between various types of fuel. In recent years, gas was losing this competition, but I think the share of gas will be rising in the future in global energy balances.”

By. Joao Peixe of Oilprice.com