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    LNG: A Part of or Alternative to South Stream's Future?

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Summary

Russian Prime Minister Vladimir Putin has asked his Energy Minister to investigate the possibility of building an LNG plant on the Black Sea coast.

by: C. A. Ladd

Posted in:

South Stream Pipeline, Natural Gas & LNG News, Pipelines

LNG: A Part of or Alternative to South Stream's Future?

Russian Prime Minister Vladimir Putin has asked his Energy Minister to investigate the possibility of building an LNG plant on the Black Sea coast.

The LNG plant would be an alternative to building the 900-km underwater section of South Stream pipeline planned to run from Russia to Bulgaria through the Black Sea.

"Please, review as a possible part of South Stream implementation the construction of a liquefied natural gas plant in the Russian Federation's southern region of the Black Sea," Putin told Energy Minister Sergei Shmatko.

According to a source from the Russian Energy Ministry, the potential LNG terminal will process natural gas not only from Gazprom, but also from Rosneft and Lukoil; according to Putin, it would open new options for Russia to diversify its markets.

The estimates of the Russian government have indicated that if the liquefied natural gas terminal is chosen over the underwater pipeline, the investors in South Stream will save a substantial sum of money.

This option would also require Bulgaria will also have to build an LNG terminal on its coast in order to receive the liquefied natural gas by ships from Russia.

The LNG option has not previously surfaced in an 'official' manner. Some say that this alternative casts new doubt on the viability of South Stream.

A standard LNG plant has the processing capacity of about 12 bcm of natural gas per year, which may cover initial export demand from Southern and Central Europe.

This in turn may reduce the need for the South Stream pipeline, which some analysts have said does not make economic sense and serves mainly political purposes.

"A Black Sea LNG project may be used as an excuse to postpone the South Stream project and eventually abandon it," said Mikhail Korchemkin of East European Gas Analysis, pointing out that currently there was no shortage of pipeline capacity.

Analysts have said low demand for gas, good relations with Ukraine, emerging LNG opportunities and high cost of the project may force gas export monopoly Gazprom and the government to rethink South Stream.

Russia has sought to diversify energy exports during energy transit wars with neighbours Ukraine and Belarus, embarking on expensive underwater pipelines such as Nord Stream -- now under construction -- and South Stream.

Ukraine's  President Viktor Yanukovich has been vocal in portraying South Stream as an unnecessary project and insisting Ukraine provides the best and most economical route for Russian gas transit.

Shmatko told Putin the idea to build LNG on the Black Sea coast was proposed by the European Commission during recent talks in Brussels. Russia is due to make a South Stream presentation to the commission in April.

Sources: Newswires