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2015 January 30

Liquid gas sellers

Gazprom has chosen the location for its new LNG terminal in the Baltic region – it is to be built at Ust-Luga port. Experts believe, the project implementation will help Russian gas enter new markets. However, the investment project has not been developed yet.

LNG will go to Ust-Luga

Gazprom has recently announced its plan to build an LNG plant near Ust-Luga seaport (Leningrad region, Baltic LNG project). The plant is to produce 10 mln t of LNG per year with a possibility to be expanded to 15 mln t. Gas will be delivered to the plant from Russia’s Unified Gas Supply System.  Under the project, a high-pressure gas pipe-line is to be built from Volkhov to Ust-Luga across the southern part of the Leningrad region.

Earlier, port Primorsk was also considered as a possible location. Press center of Gazprom failed to explain why the Company opted for Ust-Luga. Valery Golubev, Chairman of Gazprom BoD, earlier mentioned this place as the most advantageous location from the point of view of ice situation and seaway construction. It should be also noted that there is more clear space for the development near Ust-Luga while regulations on LNG farms intervals are quite tough in Russia.

Gazprom does not specify the marine share of the project, how much LNG is to be used as bunker fuel or the plans on construction of specialized vessels. As Gazprom told IAA PortNews, these details will be announced upon completion of the investment project “in several months”.

Initially, Baltic LNG was supposed to be built in 2018, now it is postponed till 2019..

We’ve got long arms …

Baltic LNG is intended for diversification of Gazprom’s sales markets and ‘reach’ remote regions. Today, Gazprom delivers LNG to over ten countries. 

“Our Company holds a leading position in the global energy business. The Baltic LNG project will provide Gazprom with additional competitive advantages, enhance its presence in the dynamic LNG market and open up new supply regions for the Company,” said Alexey Miller. 

Experts say that Gazprom’s expectations are quite reasonable. As Aleksandr Ignatyuk, Director of information & analytical department of IC Energocapital told IAA PortNews, major LNG consumers in Europe are Spain and France, the countries quite difficult to ‘reach’ from Russia. “However, it is quite reasonable that Gazprom’s prices can be an adequate alternative to Algerian and Nigerian gas and, probably to LNG of Qatar and, of course to potential gas of the USA,” the analyst says.  According to Aleksandr Ignatyuk, the terms of Baltic LNG implementation do not allow for realistic forecast as regards real capacity of the facilities. “Gazprom is absolutely right to strive for keeping the European market and decreasing of transit risks is not the last thing in this struggle. Baltic LNG has a special meaning in the context of the Kaliningrad region’s energy security, which is particularly topical amid growing risks of transit via Lithuania,” says Aleksandr Ignatyuk.

Earlier, Gazprom representatives said that LNG will be partly supplied to the bunker market which is connected with the introduction of new restrictions on sulphur content in bunker fuel (0.1%) in sulphur emission control areas (SECAs: Baltic Sea and North Sea).

Baltic LNG is not the only project of Gazprom in this sector. The Company is going to build a comparatively small LNG plant and terminal in Vysotsk (Leningrad region). On November 26, 2014, Cryogas CJSC (100% owned by Gazprombank) signed an agreement on construction of a 660,000 tonne LNG terminal near port Vysotsk.  Cryogas-Vysotsk firm has already been registered in the Vyborg district and preparatory work on the project is underway. Besides, Gazprom is implementing Vladivostok LNG project >>>> 

Moreover, Russia has LNG projects of other companies (Rosneft and Nordic Yards) >>>> 

However, implementation of these projects seems to be difficult amid sanctions and unfavorable economic situation.

Vitaly Chernov