Russia is planning to increase its pipeline gas and LNG exports in the next three years with an eye to boosting shipments to Asian markets, according to draft government documents seen by Energy Intelligence.
The Russian Economic Development Ministry’s draft 2024-27 forecast, seen by Energy Intelligence, suggests in its base case scenario that Russia’s total pipeline gas exports will increase to 122 billion cubic meters in 2027. Piped exports are expected to total 111.4 Bcm this year, up from 101 Bcm in 2023, mainly due to a ramp-up of volumes to China. In the ministry’s conservative scenario, which factors in slower economic growth and higher sanctions pressure on Russia and its partners than in the base case scenario, piped exports will only increase marginally to 113 Bcm in 2027.
Following the loss of the circa 120 Bcm per year in pipeline exports to Europe due to the country’s invasion of Ukraine in 2022, Russia intends to “restore and increase” pipeline gas exports by tapping the growing markets in Asia and develop LNG exports despite the growing sanctions pressure, Deputy Energy Minister Pavel Sorokin told the recent Eastern Economic Forum held in Vladivostok, an event traditionally focusing on fostering Russia’s Asian partnerships.
Gas export prices will, however, decrease both in Europe and in China, according to the ministry’s forecast. Gazprom’s oil-linked prices in China will fall to $235.40 per thousand cubic meters ($6.60 per million Btu) in 2027 from $288/Mcm expected this year. In other export markets, including Europe and Turkey but excluding former Soviet Union states, Gazprom’s mostly hub-linked prices will be $330/Mcm in 2027, down from $350/Mcm in 2024.
Meanwhile, Russian LNG exports are expected to increase to 58.4 million tons in 2027 from 33.3 million tons in 2023 and the 35.2 million tons expected this year in the ministry’s base case scenario. The conservative scenario forecasts LNG exports reaching 38.6 million tons by 2027.
The base case scenario appears to assume the full operation of the blacklisted Arctic LNG 2 facility’s three trains totaling 19.8 million tons per year, which appears doubtful due to the US and EU sanctions on the project. Only one 6.6 million ton/yr Arctic LNG 2 train has started up in December 2023, with a second train of the same capacity expected to start by the end of the year.
Eastern Pivot Struggles
Russia’s eastern pivot has yet to materialize as the country’s pipeline infrastructure is reconfigured to service Asia and new contract negotiations are stalled by price disagreements and demand uncertainty.
Since the start of the war in Ukraine, Moscow has only signed a two-year 2.8 Bcm/yr contract with Uzbekistan starting last year and a 15-year deal with Kyrgyzstan, where modest supplies will begin in 2025. Gazprom is currently in talks to sign long-term contracts with Uzbekistan and Kazakhstan.
The state-run pipeline export monopoly also signed a memorandum on potential pipeline gas supplies to Iran earlier this year, but no firm deal has been signed yet. Cooperation with Iran could also open the way for supplies to markets in southern Asia, where “there is a colossal need” for gas imports, Russian President Vladimir Putin said at the Vladivostok Forum.
Pipeline exports to China have increased to 22.7 Bcm in 2023 from 10.4 Bcm in 2021, in line with the scheduled ramp-up of the 38 Bcm/yr Power of Siberia contract expected to reach plateau volumes in 2025. Gazprom also aims to start supplies in January 2027 under the separate 10 Bcm/yr “Far Eastern route” contract signed just before the war, according to CEO Alexei Miller. But negotiations on the key 50 Bcm/yr Power of Siberia 2 supply contract appear stalled, complicated by price disagreements and uncertainty around China’s future demand.
Meanwhile, Russian LNG exports to Asia remain below prewar levels after falling by 5% to 15.8 million tons last year. Chinese demand for Russian LNG grew to 6.9 million tons in 2023, a 56% increase from 2021, according to data from commodity analytics firm Kpler. Supplies to China tripled from the Sakhalin-2 facility in Russia’s Far East to 2.6 million tons in 2023 versus 2021, all sold on spot, and increased by 14% to 4.1 million tons from privately owned Novatek’s Yamal facility in the Russian Arctic where China National Petroleum Corp. is a shareholder and a long-term contract offtaker. China is also seen as one of the few possible destinations for discounted spot cargoes from the blacklisted Arctic LNG 2 facility.
Gazprom’s 1.5 million ton/yr Portovaya LNG plant in northwestern Russia has been mostly exporting cargoes to Europe, including Turkey, since starting operations in September 2022. The facility sent three cargoes to China last year and has sent an additional three since the start of 2024, but the long journey to Asia puts pressure on the plant’s limited tanker capacity. Its latest cargo was sent earlier this month through the North Sea Route to Asia, with its exact destination still not clear. Two other tankers are returning westward from Asia to the facility via the North Sea Route, leaving just one tanker available to service Europe, which just delivered its latest cargo to Greece on Sep. 1.