Russia natural gas output jumps to record in expansion drive

Elena Mazneva and Jake Rudnitsky 1/2/2018

MOSCOW (Bloomberg) -- Russia’s natural gas production rose to its highest ever last year, driven by increasing sales to Europe and rising domestic demand.

Government data published Tuesday showed that output jumped 7.9% to beat a 2011 record. With a pipeline of projects including plans to expand into China and new liquefied natural gas plants, the country may close the gap on the U.S., which leapfrogged Russia to the top spot in global production of the fuel nine years ago.

Russia needs to strengthen its position in the global gas market as it’s considered a leading global energy power, President Vladimir Putin said last month. Already the world’s largest exporter of the fuel, the nation is working to boost output with new LNG plants stretching from the Baltic region to the Pacific coast. That will pit the country against the biggest producers of the super-chilled fuel, including Qatar and Australia.

Russia is also working to keep shipments to Europe near record levels this year as state-run Gazprom PJSC, the continent’s biggest supplier, plans to start pipeline exports to China in late 2019. Gazprom meets more than a third of Europe’s demand for natural gas and the nation’s most lucrative market was worth some $37 billion in revenue last year.

Gazprom’s increased sales helped boost overall production to 690.5 Bcm (24.4 Tcf) last year, exceeding the 2011 record by 2.9%.

As a result of the shale gas revolution, the U.S. became the world’s largest natural gas producer in 2009, and has kept the crown for most of the time according to official data from the two nations.

U.S. producers pumped 22.1 Tcf (about 626 Bcm) of dry gas in the first 10 months of 2017, according to December data from the U.S. Energy Information Administration. This was 11% higher than Russia for the same period.

Russia has resources to increase its LNG production by almost 10 times to about 100 million tons by 2035, led by the privately-owned Novatek PJSC in the Arctic, according to the nation’s Energy Ministry.

The U.S. imposed financial sanctions against Novatek in 2014 after Russia annexed Crimea and last year added export pipelines to the list of sanctions against Russia, setting risks for Gazprom’s projects. Putin ordered the government in December to identify economic and political “threats” to the nation’s gas projects as well as steps to take to overcome or minimize them.

Officials in Moscow are also planning to improve gas-output forecasts in the nation’s long-term energy strategy, adding planned and potential LNG projects.

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