Gazprom steps on the gas

PricewaterhouseCoopers analysts forecast that in 2010, one-third of natural gas traded in the world will be liquefied. Meanwhile, Gazprom, a Russian monopoly with ambitions to be a global energy producer, is suffering from a bad shortage of liquefied natural gas (LNG) production and export facilities. The feeling at the company is that this shortage is increasingly damaging its prospects, and its management has lately made some major efforts to develop its own production and export infrastructure for LNG. Gazprom is making preparations to win a sizeable part of the market in order to dominate it by 2030.
LNG projects are being undertaken in response to changes in the gas market, as shown by a debate at the recent Gas Exporting Countries’ Forum in Doha, the capital of Qatar, on April 9-10. Gas producers’ growing desire to join forces is foundering on the absence of a gas market as a platform for joint moves, for example, in price coordination.

Actually, there is no global gas market at present; it is divided into regional segments, including North America, Europe, Asia and South America. Most deliveries are through pipelines, and prices are fixed by long-term contracts, rather than in daily trading. Even in the case of LNG exports, liquefication and deliquefication terminals are so costly to build that export flows cannot be rerouted on short notice, again prompting the use of long-term contracts.

On the other hand, gas exporting countries have called for some thorough structural changes in the markets, above all raising the proportion of liquefied gas in the world gas trade to at least 10-15%.

Increasing the share of LNG in the gas trade would in effect establish a world market. And that share is increasing quickly. World LNG sales in 2005 totalled 188.8 billion cubic metres, accounting for 26.2% of world gas sales (the figure was 3% in 1970).

RIA Novosti