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    Analyst: Gas Prices Will Keep Dropping--and Russia Will Suffer

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Summary

OilPrice released a detailed forecast for the gas market. On the basis of that data , Russian analyst Andrei Shipilov says the Russian gas industry will suffer

by: Azerbaijan Desk

Posted in:

Natural Gas & LNG News, Liquefied Natural Gas (LNG), Pipelines, Russia

Analyst: Gas Prices Will Keep Dropping--and Russia Will Suffer

OilPrice.com has released a detailed forecast of the prospects for the gas market. On the basis of the data released, Russian analyst Andrei Shipilov, a former USSR KGB employee, has drawn conclusions for the Russian gas industry.

He believes that the forecast is not good for Russia: gas prices will go down after oil and the decline for will be even more catastrophic than oil's.

The reason, the analyst says, is down to changing technologies of gas transportation and storage. The gas pipelines are the past, he said; liquefied natural gas (LNG) is the future as modern technologies allow liquefying and transporting gas at a lesser cost compared to transporting via a gas pipeline.

The safety level for LNG is also higher, he says.

"Liquefied gas is inflammable and when it evaporates, it ignites only within a narrow range of concentration in the air–from 5% to 15%, which is easy to avoid," he explains.

He continues, "The storage process requires virtually no energy--the storages are based on the Dewar vessels system and are almost no different from oil storages."

He says that Russia is lagging behind when it comes to investing in this newer technology, a fact that could hinder its prospects further in the gas arena in the future. 

"While other countries have understood these advantages and invested into development of the LNG infrastructure, Russia staked [its future] on gas pipelines and it seems that it has lost," Mr. Shipilov says. "The first big plant manufacturing LNG was opened in Russia only in 2006 and only after three years did Putin announce the construction of the second plant, construction of which has not been completed yet.There is a significant difference between the oil and LNG markets. LNG is smaller and even construction of several big terminals could seriously change the balance of the market. This is what is happening right now.

"[In recent years] the construction of LNG terminals was very active throughout the world. More LNG terminals will be built in 2016 and it will almost boom in 2017. This new situation makes the prices go down and coincides with a reduction of demand in gas."

He is not the only analyst to point to that fall in demand. In a statement on his website, Mr. Shipilov quotes another analyst  who spoke to Reuters. That analyst, too, forecast challenging times for gas demand. 

"From having been an import basin, Asia will next year be going to have excess supplies and worse so in 2017,"  senior analyst of Credit Suisse David Hewett told Reuters.

In light of LNG's impact, Mr. Shipilov sees a difficult future for Russia's major export, gas.

 

"The market is getting saturated," he concluded. "Prices will keep going down for a long time. Considering that construction of LNG terminals is very active in Europe now and the first terminal has been already launched in Poland, the prospects for Russia are not very promising."