Russia is an important natural gas producer, exporter and energy geopolitical player in the world. Perhaps many people still remember that in 2006 and 2009, Russia wielded the “big stick” of natural gas, which made Ukraine and European countries tremble in the cold winter wind. However, over the past ten years or so, historically significant structural changes have taken place in the world natural gas market, and Russia’s position and influence in the world natural gas market are facing multiple challenges.
The “shale revolution” is an important technological motive for changes in the international natural gas market. With this technological advancement, the United States surpassed Saudi Arabia and Russia to become the world’s largest oil and natural gas producer in just ten years. Moreover, the United States’ liquefied natural gas (LNG) is actively entering the international natural gas market, which has had a huge impact on the existing market structure. At the same time, during the economic recovery and growth cycle following the 2008 financial crisis, many manufacturers actively invested in LNG production, and Qatar even withdrew from OPEC to focus on natural gas industry development. Long-term factors such as economic contraction and global warming caused by factors such as the new crown epidemic have made the growth rate of world natural gas consumption lower than expected, leading to a large amount of overcapacity. More importantly, the pricing model of the international natural gas market is also more independent and flexible. At present, the US natural gas market has developed into a highly competitive natural gas market. Whether it is local pipeline natural gas or imported LNG, the transaction price is linked to the price index of the market trading center. The amount of natural gas traded and priced by European natural gas trading centers currently accounts for 2/3 of its total natural gas sales. The traditional Groningen model of “fix oil prices and pay or not” has become increasingly unpopular.
Europe is a traditional market for Russian natural gas exports, but in recent years Russia has encountered more and more problems in the European market. One is the increasingly fierce competition. In addition to traditional competitors such as the Middle East and North Africa, US LNG has also increased its cannibalization of the European market, putting pressure on Russia’s pipeline natural gas. Recently, Turkey and Greece are struggling to develop natural gas in the Eastern Mediterranean, while Israel, Egypt and other countries are also intensively accelerating exploration and development. If the eastern Mediterranean cross-sea natural gas can be developed on a large scale and poured into the European market, it will be a fatal blow to Russia’s natural gas exports to Europe. Second, Russia’s natural gas pipeline layout to bypass Ukraine’s exports to Europe has encountered strong obstacles. The sanctions imposed by the United States have made it difficult for the pipeline “Beixi-2” to be completed. Recently, the Russian opposition leader Navalny’s poisoning incident has suddenly strained German-Russian relations. Germany, which has always supported the “Beixi-2”, has also begun to strongly question the rationality and reliability of this project, and even not Eliminate the possibility of sanctions and even suspension of projects. In addition, with Turkey increasing imports from Azerbaijan, Iran, Qatar, Nigeria and even the United States, Russia’s natural gas exports to Turkey plummeted from 2.254 billion cubic meters in January to 2 million cubic meters in June. At present, Turkey has almost completely stopped. To buy gas from Russia. Third, under the pressure of ever-increasing market competition, Russia was forced to gradually abandon the Groningen model and began discounting sales to European natural gas buyers.
Changes in the international natural gas market reduced Gazprom’s net profit in 2019 by 17% to 17 billion U.S. dollars. In the first half of 2020, the company exported 91.1 billion cubic meters of pipeline natural gas, a year-on-year decrease of 17.8%. Export revenue was 11.3 billion US dollars, a decrease of 51.2% year-on-year. The export of natural gas to Europe was 78.9 billion cubic meters, a year-on-year decrease of 18.14%, and the export value dropped by 49.88%.
In the face of heavy pressure, Russia tried to break through more points and get out of the predicament. On the one hand, actively deploy LNG production and export. The Sakhalin-2 LNG project put into operation in 2009 has a designed annual production capacity of 9.6 million tons and an actual production capacity of 10.8 million tons; the Yamal LNG project has an annual production capacity of 16.5 million tons. With the Yamal project operating at full capacity, Russia’s LNG production reached 29.5 million tons in 2019, an increase of 47.4% year-on-year; LNG exports reached 29 million tons, an increase of 76.2% year-on-year, making it the world’s fourth largest LNG exporter. In 2019, Russia exported 15.07 million tons of LNG to Europe. In 2018, this amount was only 4.4 million tons. This brings Russia’s LNG market share in Europe to 20%. On the other hand, Russia and Ukraine reached a compromise in an attempt to exchange sanctions by the United States and Europe. On December 30, 2019, Russia and Ukraine signed a new natural gas transit transportation contract. In the next five years, Russia will ensure 225 billion cubic meters of natural gas transit through Ukraine. Gazprom also paid U.S. Oil and Gas a total of US$2.9 billion, including late fees, in accordance with the Stockholm Arbitration Court. More importantly, Russia has turned its hopes of life-and-death natural gas exports to the Chinese market. After the Sino-Russian East Route natural gas pipeline was put into operation, Gazprom and Mongolia recently established a joint venture to study the feasibility of constructing and operating a natural gas pipeline to China in order to supply natural gas to China. This move Quite aspirational means to get.
