Mikhelson announced the dependence of the world market on new LNG projects in Russia

The growth in global gas demand can only be achieved through new projects for the production of liquefied natural gas (LNG) in three countries – Russia, Qatar and the USA. This was stated on November 3 during the XVI Eurasian Economic Forum in Samarkand by the chairman of the board and co-owner of Novatek Leonid Mikhelson. According to him, “more than 70% of liquefaction in the world” is planned based on the reserves of these three countries.

World gas consumption, according to Mikhelson, is about 4 trillion cubic meters. m per year, of which export supplies account for 1.2 trillion cubic meters. m (650 billion cubic meters through pipelines, 550 billion cubic meters in the form of LNG). At the same time, LNG provides 2/3 of the increase in gas demand, which averages 2%.

According to Novatek, global demand for LNG will reach 750-800 billion cubic meters by 2030. m (that is, it will increase 1.4-1.5 times to the current level. – Vedomosti). Gas consumption in Europe, according to Mikhelson, will increase by 30 billion cubic meters. m to 190 billion cubic meters. m per year, and in Asia – by 200 billion cubic meters. m. In particular, demand will grow in China, where 28 LNG receiving terminals with a total capacity of about 180 billion cubic meters are already operating. m per year, as well as in India, where the terminal capacity will reach 80 billion cubic meters. m in 2024, Mikhelson specified. According to him, LNG consumption is also predicted to increase in Indonesia and Pakistan.

Last year, Russia ranked fourth in the world in terms of LNG exports: its share was 8.2%, according to data from the International Group of LNG Importers (GIIGNL). The top three included Qatar (20.3% of the market, or 79 million tons), Australia (20.2%, or 78.5 million tons) and the USA (19.4%, or 75.4 million tons).

Mikhelson emphasized that the potential of Qatar’s resource base is “already being fully realized,” and European companies are entering into contracts for gas supplies from this country with an expiration date beyond 2050. In October, the Italian Eni entered into a 27-year contract with Qatar. The company will receive 1 million tons of LNG per year from 2026. Prior to this, long-term contracts for Qatari LNG were received by the British Shell and the French Totalenergies – 3.5 million tons per year.

Gas from the United States is much more expensive, since the share of shale gas in the country’s production structure has reached 79%, Mikhelson noted. “Under these conditions, the Russian <…> We must introduce new projects,” he concluded.

The Russian authorities plan to increase the country’s share in the LNG market to 30% by 2035 from the current 7%, said First Deputy Minister of Energy Pavel Sorokin on October 31 during the St. Petersburg International Gas Forum (SPIGF-2023). Such a plan is being considered when preparing Russia’s energy strategy until 2050. In 2022, the production of liquefied gas, according to the Ministry of Energy, increased by 3.6% by 2021 to 31.3 million tons. The current energy strategy until 2035 assumes that LNG production in Russia should increase to 100 million tons by 2030 and 140 million by 2035.

To implement these plans, about 20 large- and medium-scale LNG plants should be launched by 2035. There are currently two large-scale projects in operation – the Yamal LNG plant of Novatek (design capacity – 16.5 million tons per year) andSakhalin-2“(9.6 million tons), controlled by Gazprom. The medium-tonnage Cryogas-Vysotsk plant (a joint venture of Novatek and Gazprombank) produces 660,000 tons of LNG per year, and Gazprom’s KSNG Portovaya produces 1.5 million tons.

At the end of 2023 – beginning of 2024, it is planned to launch the first gas liquefaction line at Novatek’s Arctic LNG 2 plant, the second should start operating in 2024, the third in 2026. At the same time, the United States on November 2 – on the eve of Michelson’s speech at Forum in Samarkand – new sanctions were introduced against the project operator Arctic LNG 2 LLC, and earlier – against its contractor Arctic Energies LLC. American companies are prohibited from conducting transactions with Arctic LNG 2, but the OFAC license (Office of Foreign Assets Control of the US Department of the Treasury) allows transactions necessary to exit the capital and debt obligations of companies until January 31, 2024, if payment is received in a blocked account .

Also “Novatek» plans to build Murmansk LNG with a capacity of 20.4 million tons per year.

According to Mikhelson, the situation with gas prices in the world should stabilize in 2026-2027. “This makes us happy: there will be low prices and countries will begin to review their energy balances. The share of gas will be a priority at normal prices,” the businessman believes.

Mikhelson called the prices of $30-35 per MMBTU (million British thermal units; equivalent to $1071-1250 per 1000 cubic meters – Vedomosti) that prevailed for gas last year “a disgrace.”

The rise in gas prices in Europe began in 2021, and they reached their peak in March 2022 after the start of the SVO in Ukraine. At that time, gas prices at the TTF hub in the Netherlands were close to $3,900 per 1,000 cubic meters. m. Then prices declined throughout the year and in December dropped below $1,000 per 1,000 cubic meters. m, we haven’t climbed higher since then. On November 3, December gas futures were trading around $540 per 1,000 cubic meters. m.

Novatek’s forecast for gas demand is close to the upper part of the forecast ranges of the world’s leading agencies, notes Finam FG analyst Sergei Kaufman. But it may not come true if gas prices remain high, which restrains demand growth, he believes.

In addition to Russia, the USA (by 11 million tons), Qatar (28 million tons), Australia (10 million tons), Canada (14 million tons), Indonesia and Malaysia ( for a total of 7 million tons), recalls Gennady Masakov, head of the analytical center of the Yakov and Partners company. If gas prices remain high, more projects will move from potential to actual, so the LNG market could become oversupplied, Kaufman cautions.

“Competition in the LNG market is growing, although Novatek’s position remains strong due to low costs,” Kaufman clarifies. According to Masakov, Russia’s plans look the most ambitious compared to others, but the lack of Western technologies may become an obstacle to their implementation. Kirill Rodionov, an expert at the Institute for the Development of Fuel and Energy Technologies, also believes that the expansion of liquefied gas exports from Russia will depend on the lifting of the ban on the supply of cryogenic equipment to the country.

According to Kaufman, if gas consumption from underground storage facilities (UGS) in Europe during the heating season is “average or lower,” then by March 31, 2024, storage capacity in the EU may be close to a record. In this scenario, the analyst expects fuel prices to normalize, that is, to reduce them to at least $300 per 1,000 cubic meters. m.

Masakov does not predict significant price volatility in the next three years if the current geopolitical situation continues. The escalation of the conflict in the Middle East could lead to a reduction in global gas supply, he believes: countries in the region account for about 16% of global gas exports (152 billion cubic meters), most of which goes to Asian countries and the EU.