“Gazprom has seen the rapid development of LNG threat to the economic security of the country

The probable competition with pipeline supplies can lead to a decrease in revenues of the Russian budget

Photo: panthermedia/vostock-photo

Gazprom saw in the development of LNG production in Russia, risks economic and energy security of the country. The company, in particular, noted that the decline in the average selling price of Russian gas on the external market due to the potential competition from pipeline supply may lead to reduction of incomes of the Russian budget.

According to “Gazprom” with the adjustment of the Federal strategic planning documents – the Doctrine of energy security, energy Strategy and the General scheme of the gas industry until 2035 – the need to reflect the potential risks to economic and energy security of the Russian Federation related to the development of the country’s LNG production, and measures to minimize them.

As reported, Russian President Vladimir Putin following the meeting on the development of LNG production Russia in December ordered officials together with the relevant companies “to identify threats to the energy security of Russia connected with development of LNG production in the world, as well as measures on prevention, minimizing or overcoming in the conditions of application of mechanisms of economic and political pressure to expand extraction and export of Russian natural gas.”

In proposals sent to relevant agencies, in “Gazprom” supported incremental development of the Russian LNG industry, “given that the Russian pipeline gas currently and in the long term will remain the main source of uninterrupted energy supplies to Europe, and revenues in the budget of the Russian Federation”. Today, the share of gas industry accounts for about 12% of Russian export revenues.

As told “Interfax” a source familiar with the position of the group, the company insist: “gas Supply using trunk pipelines to export markets where this is technologically possible and economically feasible, compared to LNG will provide a substantially greater budgetary and economic efficiency in the release of LNG from export duties (unlike pipeline gas) and tax incentives for new LNG projects. For this reason, creating an unprecedented favorable conditions for the implementation of new LNG projects in Russia, it is necessary to consider the high probability of displacement of volumes directed at the export of Russian pipeline gas with liquefied natural gas, the consequence will be the reduction of state budget revenues of the Russian Federation”.

“The project “Yamal LNG” is implemented with public support, the effect of which for the Russian Federation is not obvious,” – said “Gazprom”, noting that “despite the potential for LNG to remote markets that do not have access to Russian pipeline gas, significant amounts of Yamal LNG was contracted by European buyers”.

Potential risks to economic and energy security of the Russian Federation related to the development of LNG, “Gazprom” considers “in the first decline of Russia’s budget revenues, due to falling average sale prices of Russian gas on the external market due to the growing supply and competition the Russian suppliers”. “The decrease in exports of pipeline gas in connection with the replacement of its Russian LNG supplies and, as a consequence, reduced income to the state budget (LNG exempted from export duties for new LNG projects granted tax benefits),” – warn gas companies.

Also in “Gazprom” noted that much of the equipment for the implementation of new LNG projects, is imported, in contrast to the pipes and compressors, which almost fully produced in Russia and used in the construction of gas pipelines. Major investments in development of production base and infrastructure for the supply of network gas consumers have already been made or are pending implementation or completion. Also in this regard, the company warned of “reducing the economic multiplier effect due to the program importozameshchenija as contracts for the supply of technologies, equipment, ships, etc. for LNG plants mostly get not Russian and Western manufacturers”.

Besides, in “Gazprom” predicted probability of “freezing” invested in new LNG projects cost of funds due to their possible little payback due to the projected excess supply in the global LNG market”.

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