Russ Oil-Gas

01 June 2009 - The Moscow Times by Anatoly Medetsky - Gazprom has announced that it is speeding up its plans to sell more gas by tankers to a wider range of customers as it faces a sharp drop in demand from its traditional consumers in Europe. "Trends on the global gas markets create conditions for Gazprom to increase the pace of producing and supplying liquefied natural gas," the company said in a statement late Thursday. Gazprom's management board ordered the company's engineering divisions to work faster in studying options for building an LNG plant in the Far East, the statement said. The board also ordered the engineers to report on the possibility of building a long-discussed LNG plant that would use prospective gas from the Yamal Peninsula, saying for the first time that the plant would take gas from independent producers. Privately held Novatek, the second-largest Russian gas company, announced days before that it had acquired a large gas deposit in Yamal from Gennady Timchenko, an acquaintance of Prime Minister Vladimir Putin's. Timchenko's Volga Resources investment company said shortly afterward that it had increased its stake in Novatek to more than 18 percent. LNG plants chill gas into a liquid state for shipment by special tankers. A Gazprom spokeswoman said Friday that she was unaware of the deadlines for submitting the reports on either plant proposal. Gazprom is headed for a major drop in output this year. Deputy chief executive Alexander Ananenkov has predicted that production could fall 18 percent from last year's level. Exports to Europe, the company's principal source of revenue, were down 57 percent in January through April, compared with the same period last year. European customers this year have begun to prefer buying cheaper LNG in spot trading from Gazprom's competitors because contracts with the Russian company fix prices for pipeline gas to those of oil six to nine months ago, when it hovered at record high levels. The Gazprom statement had other details about its plan to build the LNG plant in Yamal, including that it was considering gas from the Tambeiskaya group of fields. Novatek's new field is part of the group. A cheaper option for Gazprom to counter slumping demand would be to offer a 20 percent discount on pipeline gas to European buyers, said Mikhail Korchemkin, director of East European Gas Analysis, a Pennsylvania-based consulting firm. If it had done so earlier this year, it would have kept sales at last year's level and earned better profits, he said. "It's like making a fast nickel instead of a slow dime," he said. In addition, cheap LNG shipments from Qatar to Europe would be Gazprom's biggest competition on the market, he said. Gazprom's comments about an LNG plant in the Far East likely refer to the idea of building a facility near Vladivostok. The company signed a memorandum of understanding with Japan's Itochu Corporation and Japan Petroleum Exploration Company, or Japex, in May to study the option. The plant would provide lower profits than the plant that Gazprom co-owns with Shell, Mitsui and Mitsubishi as part of the Sakhalin-2 project, Korchemkin said.