Gazprom to Boost Asian Market Supply

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Oct. 12 – Russian gas monopoly Gazprom may build plants to liquefy and compress natural gas on Russia’s Pacific Coast, Primorye Regional Governor Sergei Darkin said on Friday.

The project will energize development in Russia’s Far East, boosting regional economies and allowing the region to compete with Middle East producers to supply Asian markets.

Primorye, which borders China and the Korean Peninsula, may also host plants to process helium and produce ammonia fertilizer, the governor said.

President Dmitry Medvedev wants to cut the Russian economy’s “primitive” and “humiliating” dependence on raw material exports and to produce more processed goods.

At the same time, Gazprom faces growing competition in Europe, where natural gas from North Africa (Algeria, Egypt) and the North Sea (Norway) is gaining ground and liquefied natural gas (LNG) is an increasingly formidable force.

The European Union, Gazprom’s biggest export market, is actively diversifying its gas imports to mitigate its dependence on Russia. Gazprom has said it wants to eventually ship as much gas to Asia as to Europe.

According to the region’s investment plan, Gazprom may build a liquefied natural gas facility to process 26 billion cubic meters of gas a year. The US$24.2 billion plant may be built by 2015. A compressed natural gas, or CNG, plant is also being considered.

“The Primorye region’s advantage is we are close to all of the 21st century’s economic growth centers: China, Korea and Japan,” Darkin said.

The country’s first LNG plant on Sakhalin Island can produce 9.6 million tons of LNG a year, about half the capacity of the proposed Vladivostok facility. It provides roughly 7 percent of Japan’s LNG imports and 5.6 percent of South Korea’s gas needs. The two countries depend mostly on the Middle East for LNG imports now.

South Korea’s state-run KOGAS plans to increase imports of Russia’s natural gas as much as 100 times by 2015 to 200 billion cubic meters as Gazprom considers shipping LNG and CNG by tanker or building a pipeline either via North Korea or under the sea.

The CNG plant will be able to ship fuel as far as 4,800 kilometers, Darkin said.
“Kogas wants to work with Gazprom on Far East gas projects and invest in a regional gas distribution network,” he said.

“There are markets we want to enter, and we need to understand it’s easier to enter with a partner that already has market share than to break into it ourselves,” the governor said.

The Russian government owns 50 percent of Gazprom, which is vertically integrated and active in both natural gas and oil. Gazprom supplies most of Russia’s energy demand, and holds a monopoly over gas exports to Europe and the countries of the former Soviet Union.

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