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Russia moves to break up LNG export monopoly

Last Updated: Wednesday, October 30, 2013 - 21:00

Moscow: The Russian government took the initial step Wednesday to break up natural gas giant Gazprom's monopoly on exports and allow smaller companies to compete in booming Asian markets.

The draft legislation backed by Prime Minister Dmitry Medvedev's cabinet for the first time allows state-held Rosneft and privately-run Novatek to ship liquefied natural gas (LNG) to foreign clients.
The measure will preserve Gazprom's monopoly on pipeline gas exports that are primarily directed at European markets.

"This is a very serious decision that, to a certain extent, does away with the monopoly on exports," Medvedev told a televised government meeting.

Both houses of parliament are expected to pass the legislation in time for President Vladimir Putin's signature later this year.

The proposed measure underscores the government's desire to protect Russia's status as top natural gas exporter in the face of growing competition from North American shale.

But it also signifies the state's displeasure with Gazprom's failure to kick-start its stalling production or negotiate agreements with countries such as China that could diversify Russia's energy client base.
Both Rosneft and Novatek have been the rising stars of Russia's tightly-regulated energy market in the past 10 years.

Top crude producer Rosneft is trying to build up its stake in the natural gas market as part of a strategy to become a global major that could compete with the likes of US super-giant ExxonMobil.
Novatek meanwhile has rapidly grown into Russia's largest independent natural gas producer and is grabbing a growing share of the domestic market.

Both companies are eager to launch lucrative LNG deliveries to countries such as Japan and South Korea -- a drive that Gazprom has been trying to block.

The draft legislation covers energy companies in which the government either owns the majority stake or that have current plans to build gas liquefaction facilities near fields they already own.

The first provision covers Rosneft while the second concerns the USD 20-billion Yamal LNG project in which Novatek is partnered by France's Total and China National Petroleum Corp (CNPC).

Energy Minister Alexander Novak said the government had no immediate plans to open up LNG exports to other players.

"There is no need to talk about this now," Interfax quoted Novak as saying.

First Published: Wednesday, October 30, 2013 - 21:00
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