Russia faces a tough fight for third place in the world in LNG exports

The Gas Exporting Countries Forum (GECF) published a report both on the results of 2023 and on the development of the global gas market by 2050.

Winter statistics for Russia turned out to be unexpectedly favorable. Last winter, due to cold weather, gas purchases in the EU increased significantly: in two months by 6%. At the same time, Russian exports increased by a quarter.

However, there is no reason to rejoice at the winter gas offensive. The European gas market, which has been a premium for us for many years, according to almost all analytical centers, including the International Energy Agency (IEA), has already been practically lost. Moreover, in 2025, Ukrainian transit will most likely be blocked. However, so far only in the pipe segment. Opportunities for increasing supplies of Russian liquefied natural gas (LNG) to the EU, at least until 2027, when an embargo may be declared, remain more than significant. Moreover, according to the IEA, the European LNG market accounts for 25% of the global market.

Let us recall that the GECF is an intergovernmental organization that includes 12 member countries and 7 observers. These countries control 71% of the world’s gas reserves, 44% of production, 52% of LNG exports and 51% of pipeline exports. It was established in 2008 at the initiative of Russia and Iran. The headquarters is located in the capital of Qatar, Doha. Some participants in the global fuel market consider the GECF a “gas OPEC.” But many members of the Forum are still opposed to turning it into a cartel.

Even from this brief information about the GECF it is clear that its documents reflect the interests of most of the largest gas producers and exporters. However, the USA, Canada and Australia do not support the GECF. In other words, the reports and especially the GECF forecasts may seem overly optimistic, since they are based on the idea of ​​​​growth in global gas demand until the middle of this century. But nevertheless, the forecasts of GECF analysts are based on objective facts of today and reasonable prospects. And they always generate genuine interest in the expert community.

In addition, most of the GECF estimates and forecasts are in one way or another close to the calculations of other research structures, for example the IEA. True, GECF analysts set their sights on more than a quarter of a century at once – until 2050. Their colleagues, as a rule, limit themselves to forecasts up to 2030–2040. Apparently, Khoja Nasreddin’s prediction is popular in the GECF apparatus – after so many years, “either the donkey will die or the emir.”

Nevertheless, the latest GECF report, in particular, predicts that “to meet the growing demand for natural gas, global gas production will increase and reach 5.3 trillion cubic meters by 2050.” This will be possible due to an increase in production by 1.3 trillion cubic meters (32%) compared to the 2022 level.

The list of the five largest producing countries will also change slightly by 2050. The leader in 2022 is the United States, second to fifth places are divided respectively between Russia, Iran, China and Canada (a total of 57% of world production). The top four will remain the same in a quarter of a century, but Canada could be displaced by Qatar.

However, in order to maintain its second place, Russia, according to the GECF forecast, will have to significantly increase gas production. If in 2023 production did not exceed 636.7 billion cubic meters, falling by 17% to the level of 2021, then by the end of the 2030s production will finally return to the levels of the early 2020s, that is, it will significantly exceed 700 billion cubic meters. In 2050, there is hope for 900 billion. Annual exports could reach 310 billion cubic meters. And domestic consumption will increase by 100 billion.

The long-term prospects for the global and Russian gas markets are outlined in the GECF report from opposite positions. Global demand for gas is only growing, and accordingly, supply is growing at a significant pace. While the IEA and the European Commission believe that by 2050, or at most by 2060, renewable energy sources will completely replace hydrocarbons.

But for Russia everything is not so optimistic. According to the GECF forecast, the domestic gas industry will replace the lost premium EU market with the eastern direction for more than 10–15 years. Although there are indeed reasons for pessimism. In 2021, 145 billion cubic meters were supplied to EU countries through the then still functioning gas pipelines. And 15 million tons (20 billion cubic meters after regasification) of LNG. Last year, along the Balkan and Ukrainian pipe routes – about 20 billion cubic meters and the same amount of LNG.

A full-fledged turn to the East has not yet occurred. “Power of Siberia” will reach full capacity in 2027 (38 billion cubic meters per year), the Far Eastern route of 10 billion annually is still under construction. The fate of Nord Stream 2 (50 billion cubic meters) remains unclear.

But the GECF favorably assesses Russia’s future role in the global liquefied gas market, which will occupy 64% of all gas: “By 2050, Russia will overtake Australia as the third largest supplier of LNG in the world.” Encouragingly. But why Australia to settle in third place? Now this country ranks second in the world in LNG exports, significantly inferior to the United States, but slightly ahead of Qatar. Thus, according to ship broker Branchero Costa, the United States accounts for 21.7% of global supplies, Australia – 19.7%, and Qatar – 19.2%. Russia is fourth with 8%. So first we need to get around Qatar.

Which is not so simple, since last year, despite the increase in supplies to the EU, overall Russian LNG exports decreased by 6.1% compared to the previous calendar period and amounted to 30.9 million tons.

The date when we reach production of 140 million tons per year also raises questions – namely, 2050. Not soon. In the “Long-term LNG Production Program”, approved by the government back in March 2021, the desired indicator, however, under favorable circumstances, should be achieved by 2035. And the Cabinet of Ministers continues to proceed from this forecast. In any case, Deputy Prime Minister Alexander Novak said at the end of February that in 2030 Russia will produce 110 million tons of LNG (almost 150 billion cubic meters after regasification). And the overwhelming majority of products will be exported. So we will take third place not in 2050, but twenty years earlier. Unless, of course, they interfere with us…

The attack on Russian LNG producers (and in addition to gas companies, oil companies also plan to produce it) has been going on since 2022. To begin with, Western patent holders and owners of technologies for large-scale gas liquefaction (5–6 million tons per year per production line) left Russia. But one of the Russian manufacturers initially managed to develop a medium-tonnage technology (3 million tons) called “Arctic Cascade”. And then introduce large-scale production – based on the gravitational production method. On its basis, a plant of offshore platforms was launched last fall, the first of which is already operating on the Yamal Peninsula.

Then the US Treasury announced sanctions against Arctic LNG-2. The shareholders had to declare force majeure, which precluded the conclusion of long-term export contracts. All that remains is to trade on the volatile spot market.

There are also problems with ice-class gas carriers. Those under construction in South Korea are also subject to sanctions. But even in this case there is a partial way out. In March, construction began on the Volkhov-Murmansk-Belokamenka gas pipeline, which leads to an offshore LNG plant with a capacity of 41 billion cubic meters per year. The waters of the Kola Bay do not freeze. It is possible to do without icebreaking gas carriers.

That is, the battle for our place in the global LNG market must be won. There are possibilities for this. But there are also objective limitations. The main one is consumers. Whether there will actually be a significant increase in the use of LNG over a long period of time, primarily in China, as the GECF believes, is not fully known.