The recent history of natural gas has been dominated by pipeline economics and pipeline politics and this history is not yet at an end. But parallel to this history another historical development in the natural gas arena is also taking shape, albeit slowly and unassumingly.
This development is the growing importance of liquefied natural gas (LNG) in the global energy market, which both major energy consuming and producing countries have been trying to take part.
This is because during the 2000s, global LNG prospects were radically transformed. The combination of technological advancement, cost reduction in the supply chain and the insecurity in pipeline deliveries changed perceptions with regards to the LNG market.
As a result of these far-reaching developments it seems clear that the future of natural gas will be more diverse than now, with increased opportunities to export LNG all over the world. In this context, an April report by Pricewaterhouse Coopers suggests that LNG will account for one-third of all gas trade in 2010 and 62 percent by 2020.
This new and emerging fact is so accepted by energy experts, companies and particularly by major gas consuming and producing countries that these countries have all started investing heavily in the LNG field.
Sales of LNG installations and equipment such as regasification terminals and seaborne carrier vessels are increasing by the day as uncertainties in the global oil and gas market continue to haunt consumer countries.
For this reason many consumer countries are thinking and planning to support their present gas supplies with LNG deliveries. In this regard, the US is a good example because 45 LNG vessels are currently under construction in various countries to carry LNG from Qatar to the US.
Seeing an opportunity to strengthen its gas dominance further by LNG deliveries, Russia has been trying to assemble an LNG fleet of its own for some time. The Sovcomflot shipping company, whose CEO Igor Shulov is one of Russian President Vladimir Putin’s most trusted advisers, is leading this effort. In January 2007, Sovcomflot took the delivery of two LNG carrier vessels built by South Korea’s Hyundai Corporation to be followed by others. In fact, in partnership with Japan’s NYK Line, Sovcomflot has four LNG carrier vessels on order, two with South Korea’s Daewoo and two with Japan’s Mitsubishi.
When Russia’s LNG fleet is assembled and put into operation, five LNG carrier vessels are slated to handle LNG deliveries from the Sakhalin-2 oil and gas field in the Russian Far East. Of course this is a modest step in comparison with the global LNG deliveries but it clearly shows that Russia is determined to have an important role in global LNG trade and for this reason Russia’s gas giant Gazprom has changed its gas policy of not letting foreign companies to exploit gas fields recently and made a deal with France’s Total to operate Shtokman gas field jointly.
Gazprom announced on July 12 that it had chosen Total to be a partner in Shtokman, mainly because of the company’s vast experience and expertise in LNG and added that it hoped to have the field operational by 2013, producing 71-94 billion cubic meters per year.
Russia’s reversal of policy not to permit foreign companies in its gas sector is very significant. On the one hand it shows its technical deficiency in the LNG field and on the other the expedient efforts in its national foreign policy.
At the same time, it is reasonable to say that Russia’s LNG ambitions and plans might also have political motives because assuming a considerable capability to ship large quantities of LNG to Asian countries, the US and Canada, and probably others, may eventually increase its political clout in these countries.
Russia’s LNG move is the latest in a series of actions aimed at its becoming a dominant global energy power.
VIEW BY FIKRET ERTAN
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