Russia's strategy to attack the Asian LNG market

Russia’s strategy to attack the Asian LNG market


(News 24h) – Russia plans to ship LNG from the Arctic to Asia in early May, officially competing with the US and Canada.

Russian gas producer Novatek plans to ship cargo from its LNG Yamal facility to Asian markets via the North Sea Route (NSR) in early May, with the help of Bloomberg, citing sources. ice breaker.

Appropriation of the Russian LNG Asian market
The Christophe de Margerie ships with liquefied gas to China. Photo: Neftogaz

The shipment will become the earliest LNG consignment to Asia, breaking last year’s record almost two weeks earlier and paving the way for a record shipping season this year.

The exact timing of the LNG shipment will depend on weather conditions and the thickness of the ice sheet, according to Russian officials.

“We are discussing such a trip to ship in May,” said Nikita Sekretarev, spokesperson for Russian shipping company Sovcomflot.

It is known that in early January 2021, for the first time, the Russian company Yamal LNG tested two ships Nikolay Evgenov and Christophe de Margerie carrying liquefied gas to China along the North Sea Route to the East. without an icebreaker to guide you.

The two ships are expected to dock at Dalian and Tianjin ports later this month. If the test is successful, this trip will open up the possibility that Russia can supply Yamal gas to Asia even without a nuclear icebreaker for nine months of the year, except for March-March. , when the weather conditions in the Arctic are most complicated.

The North Sea route is the shortest route between Europe and Asia. Its eastern part is typically impassable for several months at the beginning of the year due to thick ice, which limits its transport potential. This will be a key part of Russia’s big strategy, the main trading lifeblood between Europe and Asia. Last year, 33 million tons of goods were transported through this Arctic route.

Asia is expected to be a target market for Russia in the context of relations with Europe and the US influenced by the policy under President Joe Biden.

The US has an ambitious plan to export 67.2 billion m3 of LNG in 2020 and 79.5 billion m3 in 2021. This plan was announced by the US Energy Information Administration (EIA) of the US Department of Energy. January 2020. However, the plan was clearly not feasible.

The US supply of LNG has increased significantly, amid warmer winters and the COVID-19 pandemic sharply reducing demand in the European and Asian gas markets. Average prices at the European TTF transshipment point in the first four months of this year halved compared to the same period in 2019, while spot prices in Japan fell 44%.

Even in April 2020, the US export of LNG to the European market became impractical in terms of business. Big companies in Europe and Asia have canceled contracts for June-July 2020.

“The spot LNG prices in Europe and Asia have undermined the economic viability of US exports, which are extremely price sensitive,” said EIA analysts.

Buyers are now willing to pay U.S. LNG prices at a rate that doesn’t even include liquefaction and shipping costs, said Igor Yushkov, a lead analyst at the US National Energy Security Foundation.

Now, compared to its advantages in price and transportation, Russian gas is more attractive to the Asian market.

Compared with US liquefied gas, Russian products have outstanding advantages. Novatek CFO Mark Gyetvay said they can deliver LNG to Europe for $ 3.15 / mmBtu (1 million BTU – British thermal unit) while the US manufacturers are supplying it. for 7-8 USD / mmBtu.

Their attractive price, Novatek said, is due to their much lower cost of production than their American counterparts: extract gas at a cost of 10 cents / mmBtu and liquefy gas for 50 cents / mmBtu. Meanwhile, the US will lose $ 3 / mmBtu to exploit gas and liquefy gas.

Mr. Mark Gyetvay affirmed that Russian gas has a much lower production cost than its US competitors and they also plan to expand production of LNG from the sea by about 15 million tons to 70 million tons / year by 2030. .

Another reason, Europe buys cheap Russian liquefied gas because of trade needs while the majority buys from the US because of other political pressures.

Huy Vu

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