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    Russia To Expand European Market Share Using LNG: WoodMac

Summary

Beyond Turkstream and Nord Stream 2, Wood Mackenzie does not expect Russia any more pipeline projects to Europe.

by: Joseph Murphy

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Russia To Expand European Market Share Using LNG: WoodMac

Russia is likely to look towards LNG as the means for expanding its share of the European gas market over the long term, according to a Wood Mackenzie report published on July 22.

Europe’s appetite for gas imports is set to climb from an estimated 310bn m³ this year to 400bn m³ in 2035, the Edinburgh-based research house wrote, on the back of declining indigenous production. Some 350bn m³ of this supply will come in the form of piped Russian deliveries and LNG imports (including from Russia). The remaining 50bn m³ will be piped from North African and Central Asian countries.

Surging LNG supplies will compete for market space with piped Russian gas, Kateryna Filippenko, WoodMac’s principal analyst for global gas supply, explained.

“Russia will try to increase piped gas exports to Europe, but a mix of market, regulatory, political and corporate challenges will prevent new pipeline construction beyond Nord Stream 2 and TurkStream,” she said.

As such, Moscow is likely to turn to LNG as the means for capturing more market share, according to Wood Mackenzie. These supplies of super-chilled gas are less likely to prompt opposition from Europe than increased piped Russian exports, given their flexibility.

Russia is looking to expand its LNG exports to 120-140mn mt/yr by 2035. New Russian LNG ventures will be cost-competitive against both new pipelines and rival LNG projects elsewhere, WoodMac wrote.

“Opting for additional LNG rather than new pipeline projects will mean less direct tax revenue for the government and a potential revision of Russia’s traditional export approach. And more work needs to be done encouraging co-operation between the country’s leading oil and gas companies to support this,” Filippenko said. “But LNG will ensure alignment with a range of governmental strategic goals and broaden Russia’s reach into new markets. It will allow to monetise giant gas reserves in an optimal way while derisking against European decarbonisation and diversification efforts.”