The Gazprom logo is seen on a platform at the gas compressor plant in Volokolamsk, Russia (file). Global consumption of natural gas for transportation may rise fivefold to 200bn cu m a year by 2030, according to Gazprom.
Bloomberg/Moscow
Gazprom is seeking to tap growing demand for liquefied natural gas as a transport fuel in Europe as demand for pipeline deliveries slows in its most profitable market.
The world’s biggest gas producer is targeting 10% of the global LNG-for-transport market by 2030, according to an investor presentation obtained by Bloomberg that was confirmed by the company.
“We are set to secure small-size LNG cargo deliveries from anywhere on our borders,” Eugene Pronin, who heads Gazprom Export’s efforts to use gas as a transport fuel, said in an interview. “LNG is one of the most convenient commodities that can be delivered anywhere,”
Gazprom is facing headwinds from the US shale gas boom in Europe, its most profitable market, that have resulted in lower prices at the same time new LNG projects from Qatar have ramped up competition. Confronted with slowing demand for pipeline deliveries, the Russian gas export monopoly is turning to LNG to power cars, trucks, buses and ships.
Global consumption of natural gas for transportation may rise fivefold to 200bn cu m a year by 2030, according to Gazprom.
Gazprom expects Europe’s buses and trucks to need as much as 18bn cu m a year of LNG, and an additional 11bn cu m a year for bunkering by 2030. That is equivalent to the combined annual gas consumption of Poland and Romania in 2011, according to BP data.
LNG is mainly used for heavier vehicles, while cars and lighter vehicles can run on compressed natural gas, a cheaper and cleaner alternative to diesel and gasoline.
Gazprom already operates filling stations for CNG in Germany. It is also taking part in a tender in Poland for Europe’s first project to fuel municipal transport with LNG, Pronin said. The Russian gas exporter is also seeking to enter the bunkering market in the Baltic and North Seas in preparation for tougher environmental regulations from 2015, he said.
LNG contains no sulphur or heavy metals and reduces carbon emissions by as much as 30% compared with oil. LNG meets rules set by the International Maritime Organisation that sulphur content in marine fuel must not exceed 0.1% by weight starting from 2015. The new rules mean “it will be less economical to run vessels on fuel oil and diesel because it will mean more scrubbing is needed,” Pronin said.
As much as 8bn cu m of gas a year may be needed to power vessels in the North and Baltic Seas, according to the Gazprom presentation. Mediterranean bunkering needs may require a further 3bn cubic metres a year, it showed.
“LNG as a marine bunker fuel has strong growth potential in Europe, particularly following recent regulations limiting the sulphur content in marine fuels,” Massimo di Odoardo, a gas and power analyst at Wood Mackenzie Ltd in London, said by phone. “If you were to convert all heavy ships to use LNG you could double today’s global LNG demand.”
The company plans to start production at a small-scale LNG plant in Russia’s Kaliningrad region in the first half of the year, complementing an existing plant at Kingisepp in the Leningrad region, Pronin said. Gazprom’s bigger project at Shtokman in the Arctic has been troubled by economic difficulties, hindering the country’s LNG ambitions. The country hosts one LNG plant on Sakhalin Island off the Pacific coast, which is working beyond its designed capacity.
Lack of infrastructure is slowing the expansion, making some companies doubt the breakthrough in development of LNG as a replacement for traditional motor fuels.
Maersk Line, the world’s biggest container shipping company, doesn’t expect LNG and biofuels to replace fossil fuel for at least 10 years because of a lack of refuelling facilities and the need for extra space on ships for gas tanks, Thomas Knudsen, head of Maersk Line’s Asia Pacific operations, said on December 4.
The European Commission set out proposals last month to encourage the use of clean fuels for vehicles.
The draft law would require that fuelling outlets for CNG be available across the EU at least every 150km (93 miles) by 2020. On LNG for trucks, fuelling stations would have to be installed every 400km on roads that are part of the trans-European “core” network. At present, the EU has 38 LNG filling stations for trucks, the commission said.
“There are a lot of discussions and LNG fuelling stations will need to be built along Europe’s highways to make the use of the fuel viable,” said Di Odoardo at Wood Mackenzie.
Gazprom is also considering India, Korea, China and Japan as potential markets, Pronin said.
“There is no pipeline and none are planned, in the mountains for example, but you can bring natural gas like you bring propane, firewood coal, milk, drinking water,” Pronin said.
BP takes US export capacity at Freeport LNG terminal in Texas
BP, Europe’s second-biggest energy company, signed a deal to export US gas from the Freeport terminal in Texas, joining Royal Dutch Shell, ExxonMobil and Total in the race to ship burgeoning North American production overseas, Bloomberg said.
BP’s 20-year contract is for 4.4mn tonnes a year, the same size as earlier agreements with Osaka Gas Co and Chubu Electric Power Co of Japan to start supplies from 2017 from the plant’s first unit, Freeport said in a statement. The liquefaction tolling agreement with BP will commence upon completion of Freeport LNG’s second production unit, or train.
The glut of natural gas that has caused the lowest US prices in a decade is prompting companies to seek permission to ship fuel overseas. Freeport, Texas is one of more than 20 proposed LNG export terminals in the US seeking permits allowing processing of about 31bn cu ft a day, according to the US Department of Energy.
“With the first two liquefaction trains of the project fully contracted, we intend to approach the financing markets imminently so that we can begin construction on the initial two-train facility as soon as we receive Federal Energy Regulatory Commission approval,” said Michael S Smith, chief executive officer of Freeport LNG.
Royal Dutch Shell, Europe’s largest oil company, and Kinder Morgan last month said they intend to form a company to export LNG from a site near Savannah, Georgia. That site already has permission from the Energy Department to ship gas to countries that have free-trade agreements with the US.
Total has a deal at Cheniere Energy’s Sabine Pass terminal.
