Gazprom to ramp up production in the face of global LNG glut

The world's already depressed market for LNG will come under further pressure within the next 2 years as new projects come online. Gazprom says it will continue its expansion, despite the threat of LNG over-production.

New LNG plants scheduled to come on stream worldwide in the next two years could increase global production by 30 percent – threatening a glut which could drive prices down sharply. However, Gazprom spokesman Sergey Kupriyanov, says the company which launched its first LNG plant on Sakhalin last month, wont be reviewing its mid-term LNG plans.

“This situation may influence projects that are only at the investment planning stage, like LNG plants in the Primorsk and Yamal regions. Projects that we are building now like Shtokman wont be affected.”

Gazprom promises to launch LNG production at Shtokman in 2014. But some experts dont share Gazproms optimism. Ilya Balabanovsky, an analyst with Unicredit Securities, says with no final investment decision made so far on Shtokman , LNG production wont start before 2015.

“They are trying to see what demand prospects are looking like. I mean, you know, Gazprom production volumes are down by 14% so far this year. It doesn’t make sense for them to commit the funds right now if there is not going to be any demand for it. If demand in Russia is going to keep on shrinking, if demand in Europe is going to keep on shrinking.”

Gazprom is also looking at existing regasification capacity already available on the market.
In March, Russia’s gas giant signed a cooperation agreement with Spanish company Repsol. Experts say Repsol’s LNG plants are one of the key targets for Gazprom in this tie-up.