Press Release

Russia Diversifies Gas Export Markets - Increasing Focus on Asia to Offset Potential Decline in Supply to Europe

August 22nd, 2012

Global Information Inc. would like to present a new market research report, "Russia Diversifies Gas Export Markets - Increasing Focus on Asia to Offset Potential Decline in Supply to Europe" by GlobalData.

About 93% of Russias Gas Exports are Directed to Europe

As Europe is dependent on Russia for its natural gas demand, Russia is equally dependent on Europe for its natural gas exports. In 2011, Russia exported about 218.09 billion cubic meters (bcm) of natural gas and Liquefied Natural Gas (LNG). Out of this, Europe received about 203.70bcm of natural gas through pipelines, while Asia received about 14.39bcm of LNG from Russia. Russia is clearly highly dependent on Europe for its natural gas exports (BP, 2012). The figure below shows the share of various regions in Russias gas exports (natural gas and LNG) in 2011


Russia is Witnessing Stiff Resistance to its Oil-linked Gas Prices from European Customers

European companies have been strongly resisting the expensive oil-linked pricing of Russian gas supplies in recent years. Due to a significant decline in gas prices in the spot market, European companies see it as more reasonable to take gas from the spot market than from Russia. As a result, several European utility companies have been negotiating new gas supply prices with Russias Gazprom.

During late 2011 to early 2012, Gazprom considered negotiations and signed agreements with Frances GDF Suez, Germanys Wintershall Holding GmbH and Wingas, Slovakias Slovensky Plynarensky Priemysel AS, SPP, Italys Sinergie Italiane and Austrias Econgas. Gazprom is in the process of negotiating the prices of its long-term gas supply contracts with European customers.

Besides these price negotiations, European companies have also been increasing their LNG imports from countries in the Middle East and Africa. The figure below shows the increase in the share of LNG imports in Europes total gas imports over the 2009 2011 period.


Russia Aims to Diversify its Gas Supply Markets to include China, South Korea and Japan

In an attempt to decrease its natural gas export dependence on Europe, Russia is exploring options and negotiating with countries from Asia-Pacific over pricing terms and gas supply options. Russia intends to boost its natural gas exports to Asia-Pacific. Russias diversification of its gas export markets is driven by the fact that on the one hand planned gas pipelines from Turkmenistan, Georgia, Algeria, Italy and the Syrian Arab Republic will be exporting gas to Europe, while on the other hand Europe is planning to expand its LNG regasification capacity to increase imports from various countries. Additionally, Europe seeks to develop its own gas shale potential.

The shale gas boom in the US has resulted in a decrease in the natural gas import needs of the US. LNG supplies meant for the US are will now be available for Europe and Asia. This is further going to decrease Europes dependency on Russian gas. Russia plans to divert its gas supplies to Asia-Pacific in the face of the potential decline in supply to Europe. Russia is focused on the major markets of China, South Korea and Japan as its gas export markets.

Russias Gas Supplies to Asia are Likely to Increase to about 1.6tcf by 2020

Prompted by Europe, which is looking for additional sources of gas to meet its natural gas demand, Russia has begun to take measures to diversify its gas supply markets. Russia has planned pipelines to China and South Korea. It also has planned LNG regasification terminals aimed at allowing it to export LNG to other Asian countries. Russia is under negotiations with a number of countries in Asia-Pacific to explore ways to transport gas to these markets. GlobalData expects that by 2020, Russia will be able to export about 1.6 trillion cubic feet (tcf) of gas to Asia-Pacific

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