European demand for gas is expected to fall in the coming years meaning that Russia's Gazprom must look for new customers if it doesn't want to see its revenues fall. Asia is the perfect choice; Vladimir Putin has ordered Gazprom to forge close relations with China and Japan in order to take advantage of the fast growing demand that these two nations show for LNG exports.
In order to access this part of the world, Gazprom has committed to spend more than $38 billion to develop its huge East Siberian gas field and build a pipeline to the Pacific port of Vladivostok.
Putin has stated that the huge resources in Eastern Siberia, estimated to be in the region of 1.3 trillion cubic metres of gas, will allow Russia to "create another exporting centre oriented to Asia-Pacific region."
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Alexei Miller, the chief executive of Gazprom, said that his company will invest 770 billion roubles ($24.5 billion) on the 3,200km pipeline from the East Siberian Chayanda natural gas field to the port at Vladivostok. An extra 430 billion roubles ($13.7 billion) would be used to develop the gas field itself.
Gazprom, in conjunction with Japanese energy companies, will build a LNG plant in Vladivostok which is expected to be up and running by 2020 with a capacity of between 10 and 20 million tonnes a year. The natural gas will be converted into LNG here from where it will be shipped down to China and Japan.
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also… More
Comments
As Russian energy supplies increase and as N.American competition remains doubtful despite overoptimistic reports, Russia could eventually be in a position to dictate terms. Dictate as in 'arm-twist'.
If China needs the same amount of energy that Europe needs Russia may have a very strong bargaining tool to induce greater 'cooperation/integration' by Europe led by Germany into a Eurasian entity in exchange for greater reliability of supplies, while still keeping China happy.
Making Europe compete with China for Russian supplies would be an inyeresting power play if all other circumstances favoured that situation. And I'm sure that Putin is enough of a manoeuvre master to work that play eventually.