Russia’s Yamal LNG Sees Global Natural Gas Deficit by 2018

yamal lng storage tank novatek
An LNG storage tank under construction at Yamal. Image: OAO Novatek

reuters_logo1MOSCOW, Feb 10 (Reuters) – Russia’s Yamal LNG project expects the global liquefied natural gas market to move into a deficit by 2018, which will help the country boost its share of the sector.

Yamal LNG, which also has France’s Total and China’s CNPC as shareholders, said in a prospectus for forthcoming bond issue it was banking on growing demand for LNG, natural gas that has been converted to liquid form for easier storage and transport, in Europe.

“It is expected that European LNG imports will increase to 107 million tonnes in 2025 from 38 million tonnes in 2013,” it said, adding that by 2020 the global LNG shortage would reach 50 million tonnes.

President Vladimir Putin has urged Russian companies to increase their output of LNG in an effort to double their global market share by 2020 from around 4.5 percent currently.

Analysts at asset manager Alliance Bernstein have said global LNG demand will increase, driving up prices as LNG projects that have yet to take final investment decisions (FID) are cancelled or delayed for different reasons, such as financial constraints.

This could push the market from its current surplus into a deficit early next decade, unless 90 million tonnes a year of new LNG export capacity is built by 2020, they said.

The $27 billion Yamal LNG will start output in 2017 with the aim of producing 16.5 million tonnes a year by 2021.

Yamal LNG has secured state funds worth 150 billion roubles ($2.3 billion) from a rainy day fund after it struggled to raise foreign financing due to Western sanctions over Russia’s role in the crisis in Ukraine.

In the regulatory filing, Yamal LNG said it would place two bond issues totalling $4.6 billion in closed subscriptions.

A spokesman for Novatek, Russian No.2 gas producer which controls Yamal LNG, said the project was unlikely to use all the money from the bond issues.

Russia wants to double its share in the global LNG market by 2020 from 4.5 percent currently. Gazprom and Royal Dutch Shell are key shareholders in Russia’s only LNG plant, located on the Pacific island of Sakhalin.

($1 = 65.8300 roubles) (Reporting by Vladimir Soldatkin; additional reprting by Denis Pinchuk in Moscow and Henning Gloystein in Singapore, editing by David Evans)

(c) 2015 Thomson Reuters, All Rights Reserved