“Gazprom” has nowhere to sell their gas

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Russia has nowhere to put natural gas it produces. The head of “Gazprom” Alexei Miller recently reported to Putin that his company is able to produce 617 billion cubic meters of gas, but it was able to sell only 444 billion last year. Unclaimed annual output was 173 billion cubic meters.

Russian export monopoly desperately needs buyers, and without them the development plans of production have no economic sense. Development of Yamal? Shelf development? New sites at the east of Russia? Why all the expenses and efforts, if there are no new markets, and the old ones seem to dry out?

All for $ 260

According to company executives, there is a niche market in China, where “Gazprom” leveled 2 projects of a colossal cost: “Sila Sibiri” (“The Power of Siberia”) and “Altai”. But not everything goes as declared.

First of all, it must be acknowledged that the potential of the Chinese market for Russian gas supplier turns out to be not as big as it was expected. According to the calculations of the Oxford Institute for Energy Studies and the Chinese corporation CNPC, in 2020 China would need to buy abroad 170 billion cubic meters of gas. About 80 billion will go through the pipes from Central Asia, another 12 billion – by pipeline from Myanmar, and nearly 82 billion cubic meters – in liquefied form, by LNG carriers. These three sources fully cover the needs of China’s gas import. There is no place for other suppliers.

Experts of BP in their latest forecasts have shown that during the period from 2020 to 2035 China will show virtually no increase in the volume of pipeline gas purchased abroad. If this assessment is correct, “Sila Sibiri” (“The Power of Siberia”), so as “Altai”, are not needed by China, and if they agree to receive Russian gas, they will pay lower price than the price they pay for gas obtained from other sources in the form of LNG. At the Asian market a thousand cubic meters of gas produced from LNG sells for about $260, and with massive entry of new suppliers from Australia, the US and Canada during the period from 2016 to 2020, overstocking is expected, which will allow customers to dictate their business conditions.

Meanwhile, economists from “Gazprom” in the Justification of investments for “The Force of Siberia” calculated that the cost of Yakutia and Irkutsk gas at the border of China will be no less than $260 per thousand cubic meters, and then acknowledged that with this price the project will not pay off even by 2050.

Source: http://carnegie.ru/2015/06/24/ru-60480/iaz0