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    Gazprom Hits Out At Novatek's LNG Exports

Summary

The Russian gas giant says LNG exports are costing the state budget billions.

by: Tim Gosling

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Natural Gas & LNG News, Asia/Oceania, Europe, Liquified Natural Gas (LNG), Corporate, Import/Export, Political, Tax Legislation, News By Country, Russia

Gazprom Hits Out At Novatek's LNG Exports

The Russian budget missed out on RUB30bn ($464mn) in 2018 due to the rise of LNG exports, a senior Gazprom official claims.

A letter sent by Gazprom deputy chairman Vitaly Markelov insists the 4.9mn tons of LNG exported by Novatek from its Yamal LNG project in 2018 hit pipeline exports, and therefore tax income, Interfax reports.

Gazprom’s revenue dwarfs that of Novatek. At the same time, the gas giant has long been in harness to support the Russian budget. Markelov notes that each 1,000 m3 of pipeline gas exported by Gazprom earns the state RUB5,000. Novatek’s LNG ventures are enjoying a tax holiday while the company is getting them up and running.

Gazprom and fellow state-controlled giant Rosneft have not kept pace with developments in LNG, but after being freed from Gazprom’s monopoly on gas exports the frozen fuel has started to elbow its way into the trade.

Russia exported 36.7bn m3 of LNG in 2018, representing a rise of around 50% compared with 2017. Revenues grew 66.6% to $5.286bn. Russian pipeline exports grew 3.7% in 2018 to total 220.6bn m3.

Novatek’s swift development of the Yamal LNG project has been a key driver of LNG’s rising share of Russian gas exports. Production at the far-eastern project’s third train was launched in November, after the first train went into operation in late 2017 and the second in July. A fourth train is due to launch by the end of the year.

Markelov warned that this is only making matters worse. “In February 2019, Yamal LNG became the largest source of LNG supplies to Europe (the entire LNG produced at the specified region was sent), while Gazprom’s gas exports, by contrast, decreased by 13% in the same month February 2018,” he wrote.

Russian LNG export revenues more than doubled in the first two months of 2019 in annual terms, the Federal Customs Service (FCS) of Russia announced April 8. Russian pipeline exports grew 3.7% in 2018 to total 220.6bn m3. However, they dipped 2.7% in January-February.

Novatek plans to start construction of the Arctic 2 project in mid-2019, which should produce 19.8mn mt/yr of LNG. Overall, the company hopes to hit 57mn mt/yr in LNG output by 2030, although it has also suggested that target could rise to 70mn mt/yr in the coming years.