The Red Line: The Potential Impact on Asia Gas Markets of Russia’s Eastern Gas Strategy

  reprint Russia possesses the potential to produce significant gas from its Eastern Regions, with total proved reserves  in  East  Siberia  and  the  Far  East  of  Russia  standing  at  5  trillion  cubic  metres  (Tcm)  while prospective  resources  could  be  as  large  as  65Tcm. This  would  appear  to  give  Russia  a  huge opportunity for export sales into the Asia Pacific region, which contains the world’s largest LNG importing  nations  and  two  of  the  world’s  fastest  growing  gas  markets  in  China  and  India  (also importers  of  LNG). It  is  surprising,  therefore,  that  despite  the  obvious  commercial  logic  of  linking enormous gas resources to expanding consumption centres, to date Russia’s only significant exports in  the  region  are  from  the  Sakhalin  2  project,  which  currently  sells  10.8mt  (14.6  Bcm)  of  LNG  per annum  into  the  neighbouring  Asian  markets. However,  it  is  possible  this  situation  could  change significantly over the next five to ten years as Russia attempts to re-focus its Asian efforts with plans for potential sales of piped gas and LNG.

A number of key uncertainties remain, though: will Russia finally sign a gas export contract with China; will Gazprom as a result remain the dominant player, or will its domestic competitors Rosneft and Novatek take on a more prominent role?

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If the latter is the case, will Russia’s eastern strategy be driven by LNG alone, implying much lower volumes of exports into Asia; and finally, is it possible that Russia may miss this opportunity altogether, either as a result of  political  delay  or  failure  to  price  gas  competitively  from  these  new  projects?  We  briefly  discuss these issues below and assess the potential consequences for the Asian gas market. Continue... // empowered by scharnhorst-csa.blogspot.com).

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