Suffering from sanctions in the West, Russia is looking east to the Asian energy markets for natural gas sales. But Russia will find entering that market challenging, an industry analyst said.
The Asia-Pacific market is the fastest growing natural gas and liquified natural gas (LNG) market in the world.
"Russian companies are cut off from accessing western markets," said Mikkal Herberg, research director, Energy Security Program at The National Bureau of Asian Research (NBR).
“The truth is that Russia’s natural gas monopoly, Gazprom, has been slow to move toward the east,” Gazprom has been moving so slowly in entering the Asian gas market, that Rosneft has recently been given the go-ahead to build a new LNG terminal in the east."
Russia has three proposed projects intended to serve the Japanese, South Korean, Taiwanese, and Southeast Asian LNG markets. Eventually, by 2025, Russia is to expand to China with its Gazprom pipeline deal for roughly 38 billion cubic meters per year.
Herberg said that Russia will not be able to take market share in Asia, because there will be too many very large competitors for that LNG market, including Qatar, Australia and Malaysia.
The U.S. and Canada will also be competing in the Asian LNG market within the next 5-10 years, Herberg thinks that Gazprom should have made largescale investments in the region at a faster pace.
- Russian’s national strategy is to enter Asian market
“The expansion of oil and gas trade to Asia Pacific has been a priority of Russian energy strategy for years, and Gazprom was aware of its role in it,” said Alexander Kurdin, Head of Department for Strategic Research in Energy, FSBU Analytical Center, a Russian government think=tank.
"Since Asia Pacific is the most attractive and still 'undivided' market for hydrocarbons, it is not surprising that Russian companies try to find a niche there, and the government supports those efforts, -- Asia is one of the most attractive energy markets in the world."
"It is true that current and possible future sanctions give a strong incentive for Russian companies and the Russian government to go east," said Kurdin. "However, oil and gas contracts have been discussed and some of them have been concluded long before these sanctions."
Asian prices will be higher compared with American and European prices in the long term; however, it's possible that this spread will narrow, possibly in the near future, Kurdin predicted.
In May, China and Russia agreed on a 30-year, $400 billion deal to supply China with natural gas from fields in Eastern Siberia, a move which will further increase Russian export revenue.
Also Russia is in talks with Japan, South Korea, and Taiwan to export LNG.
By Huseyin Erdogan and E. Gurkan Abay