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Russia’s government approved on Monday the country’s long-term development program for liquefied natural gas (LNG), expecting production capacity to rise threefold from current levels to 140 million tons per year by 2035.
“The program is based on a comprehensive approach, aimed at diversification of gas supply sources and first of all at an active use of resources of the Arctic shelf and the Far East,” Russia’s Prime Minister Mikhail Mishustin said at a meeting with deputy prime ministers on Monday, as carried by news agency TASS.
Russia is also targeting increased LNG exports, considering the expectations of sustained growth in LNG demand and trade globally, Mishustin said.
Global LNG demand is set to nearly double from 360 million tons last year to 700 million tons by 2040, thanks to continued solid demand from Asia and a rise in gas use for powering hard-to-electrify sectors, Shell, the biggest LNG trader, said in its annual LNG Outlook 2021 last month.
Russia aims to seize part of that growing demand, and its energy strategy for LNG envisages a 20-percent market share on the global LNG market by 2035.
Deputy Prime Minister Alexander Novak believes that Russia will see the most favorable environment for new LNG projects within the next five to 15 years, TASS quoted Novak as saying in comments on the LNG strategy.
According to Wood Mackenzie’s research director Giles Farrer, Russia’s Arctic LNG projects would have one of the lowest costs with low breakeven prices, alongside the massive new project that LNG export heavyweight Qatar has just announced.
“At a long-term breakeven price of just over $4 per million British thermal units, it’s right at the bottom of the global LNG cost curve, alongside Arctic Russian projects,” Farrer said, commenting on Qatar’s LNG expansion project, which is set to raise the Gulf country’s LNG production capacity from 77 million tons per annum (mmtpa) now to 110 mmtpa by 2026.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
The growth in Russia’s LNG production expansion will focus on the Arctic and the Far East or what I describe as “Russia’s Wild West” to borrow a phrase from American historical heritage. President Putin has long ago recognized the great importance of the Arctic for the Russian economy and the Russian oil and gas industry. That is why he has been pouring hundreds of billions of dollars into the region.
Russia’s plentiful gas reserves in the Arctic will be almost as cheap to produce as Qatar’s. Russia’s LNG exports will also benefit from Russia’s proximity to the European Union (EU).
Meanwhile, Qatar the world’s largest exporter and the cheapest producer of LNG in the world is already expanding its LNG production capacity from 77 mtpa currently to 110 mtpa by 2026.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London