Russian LNG exporters named; Rosneft upbeat on Sakhalin

15 July 2014 16:53 Source:ICIS

Dmitry Medvedev, the Prime Minister of Russia, on 14 July approved four companies for the export of LNG.

The list includes LNG project consortium Yamal LNG, government-owned oil and gas producer Rosneft, incumbent gas producer Gazprom and its subsidiary Gazprom Export.

The news came on the same day that Rosneft reported progress on a dispute over gas pipe access in Russia’s far east.

“Under the law, the government must provide a list of organisations that are granted an exclusive right to export LNG. I have signed this list,” Medvedev said during a meeting with the Deputy Prime Minister.

The four companies fall under the Russian law that was passed in November 2013 liberalising the export of LNG – a right previously maintained by Gazprom alone.

Gazprom retains an exclusive right to export Russian gas via pipelines.

The law came into effect on 1 December last year. Russia’s largest independent gas producer NOVATEK, which holds a majority stake in the 16.5mtpa Yamal LNG project, lobbied strongly for the change alongside Rosneft, which plans to develop a 5mtpa project in Sakhalin together with US-based oil major ExxonMobil.

Under the terms of the legislation, the export of LNG is reserved for companies that were granted a licence to build an LNG plant as of 1 January 2013 and to companies in which the government has more than a 50% stake.

Such companies must be engaged in the production of gas in internal waters, territorial waters and the continental shelf. The Black Sea and Sea of Azov are included in these provisions.

Only the four companies have satisfied these conditions so far, according to the list approved by the Prime Minister.

Rosneft dispute resolution?

One of the companies granted access to export LNG may be closer to resolving a dispute over access to the pipeline feeding gas to the Sakhalin-2 LNG plant in east Russia.

Igor Sechin, the president of Rosneft, told reporters on 14 July that the dispute could be settled outside of court. The matter involves access to the pipeline from the 5mtpa LNG project that Rosneft is jointly developing with ExxonMobil.

“We had a meeting with Alexey Miller [the chairman of Gazprom’s management committee] a few days ago. In principle, we have reached an understanding. We will formalise this understanding in the near future and the question will be resolved,” Sechin said.

Sakhalin Energy, the operator of Sakhalin-2, denied Rosneft access to the gas pipe because of its plans to add an additional train to the existing two. Gazprom, which holds 50% plus one share in Sakhalin Energy, has proposed the purchase of gas from Rosneft and the expansion of Sakhalin-2 to four trains as a potential solution.

On 10 July, Russia’s Federal Anti-Monopoly Service (FAS) ruled that Sakhalin Energy must provide Rosneft with access to the pipeline, if it has the technical or economic capacity to do so, by 10 September.

The regulator also issued a warning to Sakhalin Energy for refusal to grant access to Rosneft.

Rosneft filed the complaint with FAS back in April. The company also filed a lawsuit against Sakhalin Energy last week seeking access to its pipeline.

The ruling does not mean that Sakhalin Energy is obligated to automatically provide access to Rosneft. However, it does mean that Sakhalin Energy must provide specific technical reasons for not doing so from now on.

In a related development, Russia’s Ministry of Finance said on 15 July it will continue to collect royalties from the Sakhalin-2 project in pipeline gas rather than via cash payments until the end of 2017.

Sakhalin-2 has been paying royalties in the form of gas since 2011, when the Sakhalin-Khabarovsk-Vladivostok pipeline came on line. The gas from the project is delivered to Gazprom, which then distributes to customers in Russia’s far east under the regional gasification scheme and the regulated price regime. The government then receives profits from the gas sold in the region.

Under the current plan, Sakhalin-2 will deliver up to 1.5 billion cubic metres (bcm)/year in 2015, up to 1.3bcm/year in 2016 and up to 1.2bcm/year in 2017, according to a report in Russian business daily Vedomosti citing a source in Ministry of Economic Development. Roman Kazmin

By Roman Kazmin