Gas prospects: Russia, China and Europe
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Russia's interests emerge at the St. Petersburg International Economic Forum. Moscow is looking primarily to the EU and Asia. Among others, Gazprom CEO Alexey Miller is in attendance

As always, energy is one of the primary topics of discussion at the St. Petersburg International Economic Forum (SPIEF). Clearly speaking for Russia, industry leaders Rosneft and Gazprom both intervened on separate occasions throughout the energy conference, taking part in discussions also attended by other Russian and foreign companies, small and large. In recent years, Russia has been seeking to diminish the share of hydrocarbons in its exports and to alleviate its economy’s reliance on oil price performance. Today, officially at least, fossil fuels represent less than half of Russian exports, with a 47% share. That is still high, but even reaching that figure has come at great cost. In the meanwhile, global sales of natural gas have grown by 5.5% since 2016, of which 69% was delivered via pipeline and 31% in the form of LNG. ''This 70/30 ratio has remained largely stable for some time, and any future changes will not happen quickly,'' remarked Alexey Miller, CEO of Gazprom during a dedicated discussion at SPIEF. ''However, both are means of transporting the same product: methane. This ratio means that most buyers are located within 4,000-5,000 km of the points of extraction. On the other hand, the trading growth in LNG is telling: the market is getting more and more global.'' Also in attendance at the forum was Mohammad Hossein Adeli, current secretary general of the Gas Exporting Countries Forum (GECF), who confirmed LNG’s key role, and Sun Xiansheng, who is the secretary general of the International Energy Forum (IEF), who stated: ''We can see that of all these amounts of fuels only LNG, only liquefied natural gas, is the one to continue to increase.''

Numbers and potential of the European gas market

"This is our number one #market. We've been in #Europe for almost 50 years" – #Gazprom CEO Alexey #Miller

Gazprom’s primary market is Europe. ''This is our number one market. We’ve been in Europe for almost 50 years,'' Miller commented. In 2016, the European natural gas market grew by 6.9%, with a 1.5% rise in imports. That year proved a record one for Gazprom, which sold 179.3 billion cubic meters of gas in Europe during 2016, a 12% rise over 2015. In absolute terms, that is an additional 19.9 billion cubic meters. Record performance has also visited 2017. ''During the first five months of the year we added another 9.5 billion cubic meters. This means that with just the increase of one year and five months we have filled half of Nord Stream 2’s capacity,'' the Gazprom executive added.

''Russia has proven to be one of the most reliable gas resources for Europe. Despite all the different views that we experience and the daily political discussions between Russia and Europe, the last winter, which was the coldest winter in Europe in 30 years, we would have never been able to manage without Russian gas,'' affirmed Rainer Seele, executive board chairman and CEO of Austrian energy giant OMV. Miller added, ''If the demand for Russian gas keeps growing at the same pace as has been observed during the last 18 months, then it will need more than Nord Stream 2 to meet the growing demand for Russian gas in the European market.'' Afterward, Miller went on to explain that Nord Stream (and other current Gazprom projects) is anything but a political move. ''The new gas pipelines have better technology and safety. They are the most advanced in the world, and their internal pressure is 120 atm, whereas older ones had just 55 or 75.'' This also means greater efficiency at lower cost, because ''the new pipelines are three times as efficient as those with 75 atm, and six times more than 55 atm ones. Yamal, the main deposit from which Nord Stream gas is extracted, is practically a straight line from it that is 2000 km shorter than passing through Ukraine. In such a way, if we delivered 30 billion cubic meters of gas with Nord Stream for 25 years, we would save $43 billion compared to the Ukrainian route.'' Moreover, ''by using Nord Stream to carry gas exports, we save 9 million tonnes of CO2 each year.'' This would thus mean money saved for Gazprom and greater energy security for Europe. ''By far, the biggest investor in Europe’s infrastructure security is Gazprom. This project deserves the full support of the respective national governments, and should also get support from Brussels. We need to install additional routes for Russian gas to Europe,'' remarked Seele on the pipeline, adding, ''Some people in Brussels think that diversification of sources alone leads to supply security. This will not work. The important element here is a combination of reliable access to reliable resources and reliable transit logistics, and not some nationalistic interests of individuals abusing gas for national politics.'' Wintershall CEO Mario Mehren, also present, stated: ''If we talk about security, then we have to talk about infrastructure. The only thing that is missing to make the European market a really complete market and an independent market, a flexible market, is sufficient infrastructure.'' Hence Nord Stream 2, and hence also Turkish Stream, for which undersea laying began on 7 May.

For Gazprom, the primary market remains Europe. "This is our number one market. We've been in Europe for almost 50 years," remarked the Russian energy giant's CEO Alexey Miller

China: a world of growth and prospects

Another major market for Russian gas is China. ''This is the most dynamic market, with the strongest growth and best prospects,'' declared Miller. Indeed, in 2016 the Chinese natural gas market grew by 7% to reach 205.8 billion cubic meters. As with Europe, China’s own gas output does not cover demand, and so gas imports have risen by 22%. The mix of natural gas products purchased by China is ''roughly half from gas pipelines and half LNG,'' but ''a contract with Gazprom for the supply of 38 billion cubic meters a year will change that,'' said Miller. However, the most significant thing is that China is increasing the share of natural gas in its energy mix. Today that share stands at just 6%, but over the next five years it could rise to anywhere from 8.3% to 10%. That means that in just a few years China will be consuming 300 billion cubic meters every year. On top of that, Russian infrastructure projects in China are not limited to the Power of Siberia pipeline, but also include gas storage sites and combined cycle power plants. According to Adeli, “Long-term partnership is required for ensuring the security of supply and demand, and this is based on some sort of stability that could be provided by long-term contracts and by oil indexation.” This declaration was welcomed warmly by Miller. Mehren, finally, added: ''We need to talk more about the real target for energy policy, and that target, in my view, can only be the most cost-effective and efficient and the quickest reduction of greenhouse gas emissions. Let the market decide, let technology decide. If you do that, you will see that gas has found the right place in that market.'' The age of peak gas has yet to dawn, and it probably won’t before 2050.

According to Gazprom CEO Miller, he sayd that China's market will be "the most dynamic market, with the strongest growth and best prospects."