Russian gas and LNG play ‘major’ part in global energy security, Gazprom says

Given the impacts of turbulent geopolitical times on the energy industry, Russia’s giant Gazprom has highlighted the contributions its gas is making to oil the wheels of global energy security while discussing the size of the hand its gas and liquefied natural gas (LNG) supplies have in the worldwide energy mix at the 29th session of the Conference of the Parties (COP29) to the UN Framework Convention on Climate Change in Baku, Azerbaijan.

The Gazprom delegation to COP29 claimed Russia’s gas was a “major” factor in global energy security, when the company’s representatives delivered reports on November 14, 2024, as part of the Energy Day organized by the Ministry of Energy of the Russian Federation. Kiril Polous, Gazprom’s Deputy Head of Department – Head of Directorate, underlined in his speech that the company and the country’s gas industry “significantly contribute to ensuring global energy security.”

To illustrate his point, Polous outlined that Russian gas accounted for about 15% of global consumption last year. Since natural gas consumption is expected to increase at a pace outstripping the energy growth, Gazprom ascribes the anticipated upsurge to the advantages of gas as an energy carrier, such as its perceived eco-friendliness, efficiency, and availability from a technological point of view.

While emphasizing that natural gas could make a key contribution to the sustainable development of the energy industry, Gazprom underscored that countries interested in reliable energy supplies coupled with environmental care were actively ramping up their natural gas consumption. The report delivered by Alexander Ishkov, Gazprom’s Deputy Head of Department – Head of Directorate, focused on the role of natural gas in achieving the objectives of the climate agenda.

Ishkov, who said the specific greenhouse gas emissions associated with pipeline supplies of Russian gas were low, pointed out that Russia’s energy mix was already one of the most low-carbon energy mixes in the world, largely due to the use of natural gas. He also elaborated on Gazprom’s climate project, entailing mobile compressor stations to prevent methane emissions.

“Through the use of said efficient modern technology, Gazprom has preserved about 3 billion cubic meters of gas since 2019, which means that the company has prevented emissions of more than 28 million tons of CO2 equivalent. The obtained result made it possible for the company to register carbon units with the Carbon Units Registry of Russia. The project is going on in compliance with the Energy Efficiency and Energy Saving Policy of Gazprom,” explained the firm.

Gazprom’s climate strategy up to 2050 enables the firm to implement measures to curb the carbon intensity of its gas production, transmission, storage, and processing activities, employing domestic technologies, such as the introduction of the new-generation gas turbine engine AL-41ST-25, with increased efficiency and enhanced environmental safety characteristics.

When the Russian giant considered the impact of the events of 2024 on the long-term outlook for the global energy market a few days ago, it concluded that the main outcome of the year was continuing growth in demand for conventional energy sources against the background of the unstable geopolitical situation and increased attention to the matters of energy security.

Simultaneously, the growth in gas consumption is said to be accelerating. Based on the first preliminary estimates, global gas consumption grew by 80 billion cubic meters in January-October 2024 compared to the same period last year, with more than 70% of said growth attributable to China, Russia, and India.

The company elaborated: “Russian gas, primarily the pipeline gas supplied by Gazprom, plays a significant role in ensuring the reliability of gas supplies across China. Preparations are in progress to bring the daily gas supplies via the Power of Siberia pipeline to the maximum contractual level ahead of schedule. The project for gas supplies via the second, i.e. Far Eastern, route is proceeding strictly on schedule. According to relevant forecasts, China’s gas consumption will keep growing fast in the long-term.”

While an increase in gas consumption was also noted in Central Asian countries such as Kazakhstan, Uzbekistan, and Kyrgyzstan, the Russian player outlined that the European Union (EU) countries took actions aimed at artificial destruction of gas demand to the detriment of their own economy. The EU’s policy, in Gazprom’s view, has led to a continuous drop in gas consumption, some enterprises of energy-intensive industries being pushed out of business, and production capacities being relocated to other regions.

Following the start of the Ukraine crisis, the EU, G7, and allied partners imposed an extensive series of sanctions targeting Russia’s economy, especially the energy sector to curb the Kremlin’s revenues to finance its war effort.

The main measures taken since 2022 encompass an embargo on Russian seaborne oil imports and a price cap on oil and its products that restrict profits while still allowing sales below a certain price. The 14th package of sanctions the EU imposed on Russia was the first to include liquefied natural gas, banning all future investments and exports to such projects in Russia.

The Russian gas major continued: “Europe’s gas consumption is going to decrease further. The pace of the decrease will depend, inter alia, on the future political decisions. It should be noted in this regard that Europe’s gas production is not expected to increase in the long term, in view of the depletion of its own resource base.

“The energy systems that are based on natural gas and long-term contracts have proven their stability, which is particularly valuable among the ongoing changes in the world’s markets. In the future, natural gas will play a fundamental role in the global energy sector.”

Moreover, the transshipment of Russian LNG in the EU’s ports would also be prohibited after a transitional period. While the EU claims that its enforcement mechanisms prevent Russia from chartering or insuring oil tankers unless they comply with these limits, it also notes that Russia has sought new markets and established a ‘shadow fleet’ to evade these restrictions.

The EU and allied nations claim to have implemented measures to counter these evasive tactics by imposing targeted sanctions on specific vessels and enhancing international collaboration to disrupt such activities. During a plenary debate in October 2024, Members of the European Parliament called for enhanced maritime surveillance, tighter shipping controls, and expansion of sanctions to address the reportedly significant environmental and safety threats posed by these vessels.

 The European Parliament’s most recent resolution called for additional targeted measures against the ‘shadow fleet’ vessels in the next EU sanctions packages, including all individual ships alongside their owners, operators, managers, accounts, banks, and insurance companies.

At the start of September 2024, the United States revealed further sanctions to degrade Russia’s ability to operationalize the Arctic LNG 2 project by imposing more costs on those attempting to expand Russia’s global energy leverage. The U.S. Department of State targeted two entities and two vessels connected to attempts to export LNG from the Arctic LNG 2 project: Gotik Energy Shipping Co (Gotik) and Plio Energy Cargo Shipping (Plio Energy), which are the registered owner and commercial manager, respectively, of the LNG carrier (LNG/C) New Energy.

The U.S. spokesperson said: “LNG/C New Energy used deceptive shipping practices, including shutting off its automatic identification system, to load cargo from the U.S.-sanctioned Arctic LNG 2 project via a ship-to-ship transfer on August 25, 2024, with LNG/C Pioneer, a vessel blocked by the United States on August 23, 2024. We are also identifying one additional vessel managed and operated by Plio Energy, LNG/C Mulan, as property in which Plio Energy has an interest.

“The U.S. government will continue to answer attempts to operationalize the sanctioned Arctic LNG 2 project or otherwise expand Russia’s energy capabilities with a swift response. Working alongside our G7 partners and other allies, we will remain steadfast in countering Russia’s exploitation of its energy resources for political gain.”

Gazprom’s investment program for 2024 consists of projects, such as those related to the further development of gas production centers in the Yamal Peninsula and eastern Russia, the Power of Siberia gas trunkline, the firm’s gas processing complex, and the gas infrastructure expansion in Russian regions, as well as projects securing gas balance in peak periods.

“The overall amount of investments under the 2024 investment program will total RUB 1,641.625 billion, which is RUB 67.998 billion more than was envisaged in the initial version of the investment program approved in December 2023. The adjustments to the 2024 investment program were introduced, inter alia, in line with more precise data obtained on the amounts of investments under the current projects. The endorsed financial plan will provide for a full coverage of the company’s liabilities without a deficit,” the Russian giant added.

The Russian gas player’s board of directors has greenlighted the company’s ongoing work on implementing projects related to the production and supply of LNG to boost the flexibility and reliability of consumer gas supplies. While the large-scale plant within the Sakhalin II project is functioning in eastern Russia, the construction of the complex for processing ethane-containing gas goes on near Ust-Luga, Leningrad region. This complex will include natural gas liquefaction capacities.

Gazprom, which has also created a mid-scale LNG production facility near the Portovaya compressor station in the Leningrad region, is actively developing small-scale LNG production capacities in Russia. The primary purpose of small-scale LNG production is to ensure off-grid gas supplies for consumers located away from gas trunkline infrastructure and refuel motor vehicles with natural gas.

While eight small-scale natural gas liquefaction complexes (NGLCs) are functioning across Russia, two of them, specifically the ones in the Amur and Volgograd regions, were put into operation in 2023. The primary function of the NGLC in the first region is to provide gas supplies to the new boiler house in the Amurselmash urban district of Belogorsk while the second one serves to refuel the municipal buses of Volgograd with liquefied natural gas.

Aside from working to expand the use of liquefied natural gas in vehicles, such as in the agricultural sector, Gazprom believes LNG can also be used in railway and waterborne transport, as well as industrial machinery. Since Russia possesses proven gas reserves in conventional fields, the company has no plans to develop shale gas production. The list of top five LNG suppliers includes Russia alongside the U.S., Qatar, Australia, and Malaysia.

Gazprom underlined: “According to experts, in the long term, the increase in the LNG production will be facilitated mainly by the US, Qatar and Russia: these three countries will cumulatively account for about 75 per cent of LNG supply growth by 2035. It should be noted in this connection that this year in the US, the LNG export forecast for 2035 has been revised downwards, with a decrease by 40 billion cubic meters versus the previous forecast.

“In 2023, the main importers of LNG were the countries of the Asia-Pacific region and Europe. According to industry analysts, LNG demand growth will come primarily from Asia-Pacific in the long term. Demand for LNG is expected to almost triple in such countries of the region as India, Thailand, Bangladesh, Malaysia, Pakistan, and Indonesia.”