Why is LNG from Russia more competitive than LNG from the United States and Australia?

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Russia’s geographic location allows it to compete with the world’s largest LNG exporters, the United States and Australia, said the Russian Minister of Energy.

Russia’s liquefied natural gas (LNG) exports are more profitable and competitive due to its geographic location compared to American and Australian supplies, according to Russian Energy Minister Alexander Novak.

Russia exports most of its LNG (around 69%) to Asian markets where the world’s largest volumes of liquefied natural gas end. The country could also export its LNG via the traditional European routes of Russian gas pipelines due to the low cost and the short transport distance, the minister said in an article for the Energy Policy newspaper.

“The favorable geographic location of Russia between Europe and Asia allows our LNG to be profitable at current prices and to win competition against the United States and Australia,” said Mr. Novak. “If necessary, we can deliver liquefied gas to any European country, and it will be faster and cheaper than many other suppliers,” he adds.

Export more via the Arctic

The North Sea Route (or Northeast Passage) could be a key transportation route to link massive energy projects in the Arctic that Russia is currently developing with target markets. The road, which passes through Arctic waters and the exclusive economic zone of Russia, could reduce transport time by a third compared to exports via the Suez Canal.

The very first LNG delivery via the Northeast Passage was made by Gazprom in December 2012 on behalf of Japan and took just under a month. The cargo ships were accompanied by atomic icebreakers. Two icebreaker gas cargo ships carrying Russian LNG, sent by Novatek for the first time via this Arctic route, arrived in China in July 2018. Their journey took a little more than three weeks. For the first time in history, they were not accompanied by other icebreakers during their crossing. In July 2019, the icebreaker freighter Vladimir Roussanov set a record by crossing the ice of the Northern Sea Route in just six days, without the help of other icebreakers and covering the entire route in just 16 days. , more than twice as fast as the Suez Canal.

The predominance of LNG

The northeast passage which connects the Atlantic Ocean to the Pacific is becoming more and more passable due to the melting of the ice recorded in recent years. The crossing is much shorter than the traditional route through the Suez Canal. It should open new trade links and simplify the delivery of hydrocarbons for Russia. According to a strategy drawn up by the Russian government and published in January, LNG must represent the bulk of freight on the North-East passage which should explode in the coming years. Russia plans to increase the flow of freight via the northern sea route to 80 million tonnes by 2024, quadrupling it from 2018. At the time of the USSR, this figure was only 6, 7 million tonnes.

Experts estimate that liquefied natural gas will constitute the bulk of the freight transported by the northern shipping route. This route is currently used in particular to transport nickel and petroleum, but the volumes are rather insignificant compared to LNG.

Exporting country

Russia is one of the world’s leading exporters of natural gas. Last year, it produced more than 40 billion cubic meters of LNG, an increase of almost 50% over the 27 billion cubic meters it produced in 2018. By 2035, M. Novak expects the country to increase production to 120 million tonnes, which will account for about one-fifth of projected global LNG production.



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