Russia may fully localise development and manufacturing of LNG equipment in 5-7 years

The Minister of Energy of Russia Alexander Novak has announced that the Ministry and other government agencies have been working on a state programme aimed at increasing production and export of Liquefied Natural Gas (LNG). Another strategic goal of the programme is to ensure that Russian LNG projects will be fully supplied with locally developed technologies and equipment, including LNG tankers, reports Kommersant business newspaper. From this perspective, the programme would allow the country to act preemptively protecting its LNG sector in anticipation of any possible U.S. sanctions.

According to Alexander Novak, in the next few years, the Russian industry will be able to provide up to 80% of the equipment required by the country’s LNG sector, while production of the rest 20% will be localised in 5-7 years. These goals were set in the roadmap approved by the Government of Russia in August. Achieving them would reduce Russian LNG industry’s dependence on imported equipment.

Novatek’s Yamal LNG facility. Image credit: Novatek

The Ministry of Energy expects that investments in the LNG sector in Russia would reach 10 trillion rubles (approx. 154 billion USD) until 2035, while the annual revenue from LNG exports would increase to 35 billion USD. By 2035 the global demand for LNG would rise to 600 million tonnes per year with China and India accounting for over 50% of demand in Asia. This would allow Russia to increase its share on the global LNG market from the current 4% to 15-20% and thus join the club of the global top three LNG exporters. However, this would require Russia to increase its LNG production capacity fivefold: from the current 21 million to 100 million tonnes a year.

Novatek, one of the leading Russian LNG suppliers, plans to increase its capacity to 57 million tonnes a year, says its CEO Leonid Michelson.

“LNG projects, which are currently under construction or have recently got an investment approval would only cover the world’s demand until 2025. After that, the new window of opportunity would arise, since the growing demand would require additional LNG facilities with a capacity of 250 million tonnes a year,  85% up to the current capacity. I believe that Russia can satisfy around 40% of this new demand,” says Mr Michelson, cited by Kommersant.

The Russian government expects that by the beginning of 2019 Russia would have seven LNG facilities, including two large-capacity facilities, Gazprom’s Sakhalin-2 and Novatek’s Yamal LNG. Another large LNG facility can be built at Shtokman gas field by 2035.