According to preliminary data provided by Gazprom, in 2018, Russia’s state-own major exported to the European Union plus Turkey 201.8 Gm3 of natural gas (calorific power: 37.053 MJ/m3), that is three times more than the total volume supplied by all LNG producers to Europe. In 2018, “the share of gas supplies to the EU countries and Turkey has reached an all-time high and totaled 36.7%” (34.2% in 2017), stated the director general of Gazprom Export, Elena Burmistrova, at Gazprom’s Investor Day event, which took place in Singapore on February 28th. Burmistrova specified that the 2018 average price was 245.5 dollars for 1,000 m3 of natural gas in comparison with 167 dollars for 1,000 m3 in 2017 (+24.6% y-o-y).
As pointed out by Bloomberg on February 15th, the main reason for Russia’s increasing role as the natural gas supply leader of Europe is that the European domestic production has been steadily decreasing especially after the Netherlands, which is the second European producer after Norway, has become a net importer of gas for the first year since it has started extractions from the Groningen field in 1963.
In Singapore, Gazprom gave also notice that the pipeline Power of Siberia is close to being finished. Thanks to this new infrastructure, starting from December 1st 2019, Russia will deliver to China 38 Gm3 of natural gas annually for a period of 30 years and a total amount estimated in approximately 1 trillion m3. The contract signed in May 2014 by the two countries is a take or pay oil-link with an estimated worth value of 400 billion dollars.
However, on February 28th, Bloomberg underlined that Gazprom lost investor appeal during the last few years, especially because high cost investments reduced the possibility of higher dividend payouts. Moreover, in the next future, the company should have face other issues as sanctions imposed by U.S. and EU and the increasing competition of LNG.
Based on Oilprice.com statistics, in 2018, China imported 90.39 million tons of gas [equal to 122.9 Gm3, calorific power: 39 MJ/m3], solidifying China’s position as the world leader importer of the fuel. Due to this data, Novatek, which is the largest liquefied natural gas (LNG) producer in Russia, is planning to build an LNG terminal on the Kamchatka Peninsula in Russia’s Far East in order to boost supplies to the fast-growing Asian market (Japan is the second largest global gas importer). “If we dream for a while, then the hub we plan in Kamchatka with a capacity of 120 million tons may also become one of gas sales indices in the Asia-Pacific”, stated Leonid Mikhelson, Novatek’s Chief Executive Officer.
With regard to the 2019 liquefied natural gas market, there could be a risk of an oversupply. In fact, according to Jason Feer, head of Business Intelligence at Poten & Partners, global LNG supply is estimated to grow by 33 million tons, while demand is forecast to absorb only 16 million tons of gas. In mid February, the first signal of this issue emerged in the Asian spot LNG prices, which dropped to the lowest since September 2017.
“I am almost certain that in ten years there will be two economic-geopolitical centers in the world: Greater America and Greater Eurasia. In recent years, we have witnessed the emergence of a geo-economic center in Eurasia, against the backdrop of the new cold war. A center that is being structured around Russia and China and that should not be seen as a simple defensive alliance, but rather as a new development pole that wants and can become an alternative to the Euro-Atlantic center. It is inevitable for Russia to carve out its own space in the great Eurasia. In whose center, of course, there will be China” said Sergey Karaganov, Chairman of the Russian Defense and Foreign Policy, in the course of a interview released to the Italian geopolitical monthly review LIMES on December 4th 2018.