Russian gas reform proposal would open up LNG exports

Russian gas reform proposal would open up LNG exports

MOSCOW - Reuters
Russian gas reform proposal would open up LNG exports

Russian Prime Minister Dmitry Medvedev, left, and Russian gas monopoly Gazprom Head Alexei Miller meet in the Gazprom headquarters in Moscow, Friday, Aug. 30, 2013. AP Photo

Russia’s Energy Ministry has drafted a proposal that would liberalize exports of liquefied natural gas (LNG) and allow companies other than Gazprom to sell abroad.

With the global LNG trade expected to grow by a third in the next five years as the United States and Australia boost production, Russia is under pressure to complete new projects.

Both Rosneft and Novatek have secured buyers of LNG from yet-to-be-built plants, but need the ministry’s reforms to be adopted so they can secure project financing.

The ministry’s proposals, which have been circulated for discussion, are essential for Novatek’s Yamal LNG project and for state-controlled Rosneft’s own Sakhalin LNG project with ExxonMobil.

Russia has only one LNG plant in the Far East, now controlled by Gazprom, which liquefies gas from the Sakhalin-2 project and has an annual capacity of around 10 million tons.

A source familiar with the document said on Tuesday that the proposal would allow LNG exports by companies that hold licenses to build LNG plants, or to send the gas for liquefaction to a plant determined by the government.

The source also told Reuters that the draft proposed allowing LNG exports by companies with state holdings of at least 50 percent - if they send LNG abroad from offshore fields or from production-sharing agreements.

The Russian authorities previously planned to open up LNG exports from 2014, with a requirement that Novatek’s and Rosneft’s projects would ship gas to Asia only and not challenge Gazprom’s exports to Europe.

Gazprom, despite having agreed on cooperation with the China National Petroleum Corp (CNPC) in 2004, has yet to finalize terms on piping gas to China.

The $20 billion Yamal LNG project being developed by Novatek, France’s Total and China’s CNPC is scheduled to start producing LNG in 2016 with a view to supplying 16.5 million tons of the tanker-shipped fuel by 2018.

Rosneft’s planned LNG plant in Russia’s Far East involves Exxon, has an estimated cost of $15 billion and a production target of 2018.

The Energy Ministry declined immediate comment. Under an existing 2006 law, Gazprom, the world’s top gas producer, is the only company allowed to ship gas out ofRussia.

Gazprom had earlier said it had discussed the possibility of supplying LNG to China from a planned plant near the Pacific port of Vladivostok.