Gazprom to Buy Gas in Brunei

Jul. 20 – Russian state monopoly (and the holder of the world’s largest gas reserves) Gazprom could begin purchasing liquefied natural gas (LNG) from Brunei after 2013, when current contracts with its partner Brunei LNG will expire, the Russian daily Vedomosti reports, citing documents prepared for Gazprom’s board.

Gazprom has been struggling to start LNG projects in Russia due to global financial woes and recent discoveries of vast unconventional gas resources in the United States.

In June, Russian Energy Minister Alexander Novak met with his Brunei counterpart Yasmin bin Haji Umar in St. Petersburg, within the framework of Russia’s APEC chairmanship.

During the meeting of the two ministers, Gazprom and Petroleum Brunei signed a memorandum of understanding “for further development of cooperation between Russia and Brunei.”

“The establishment of a partnership between the major oil companies of Russia and Brunei will result in the implementation of pilot projects in the energy sphere,” said Novak, commenting on the memorandum.

“This is an excellent form of cooperation for the two countries, which will help enhance our bilateral relations,” said Yasmin bin Haji Umar.

The parties also discussed the possibility of Gazprom participating in gas exploration and production in Brunei, as well as joint projects in LNG marketing.

Soon after the memorandum signing, Gazprom announced its plan to become a dominant presence in the LNG market due to its booming demand in Asia.

“In the near future, Gazprom will become a major player in the LNG market,” chief executive Alexei Miller told company shareholders at an annual meeting in Moscow. “The demand for LNG is growing in the traditional markets, Japan, Korea and Taiwan. There is great potential in large new consumers: India and China.”

“Energy demand is also growing in Singapore, Pakistan, the Philippines, Thailand and Bangladesh,” he added, saying Gazprom expected to launch a new LNG plant in the Russian Pacific port city of Vladivostok by 2017.

Brunei LNG is half-owned by Brunei, with Japanese group Mitsubishi Corp and British company Shell each owning 25 percent. Both companies, Shell and Mitsubishi, are Gazprom partners in Sakhalin-2 project.

In contrast with many EU countries, many nations in the Asia-Pacific region are demonstrating stable growth. Asian countries now account for nearly 20 percent of the world’s gas consumption. Australia, Indonesia, Malaysia, Brunei, and Myanmar are gas exporters, and liquefied natural gas is on their offer list too. And with regards to South Korea, China, India, Thailand, Singapore, and especially Japan, they partly or even completely satisfy their needs for gas imports, and LNG (which makes up nearly 90 percent of gas supplies) plays a pivotal role in the region.

“The priority in the East is given to LNG supplies. All countries in the Pacific, including Japan, China, Korea, and India are showing a great deal of interest in the import of Russian natural gas – that is why there is a large spectrum of possibilities there. The export of liquefied natural gas may range from 10 to 25 million tons, depending on the results of technical-economic validity of the planned plant in Vladivostok and on the expansion of the Sakhalin-2 project,” said Alexander Medvedev, Deputy Chairman of the Gazprom Board of Directors.

He also mentioned that “Pakistan and Vietnam are demonstrating a fast-growing demand for gas, which means that there is no deficit in gas buyers.”