LNG drives growth in Russian natural gas production

The volume of Russian natural gas production (excluding “associated” gas from oil wells) grew by 3 % to the highest output ever – almost 690 billion cubic metres. Production of liquefied natural gas (LNG) increased by nearly 50 % as LNG operations on the Yamal peninsula reached full capacity. Russia produced approximately 40 billion m³ (29.5 million tons) of LNG last year, about 6 % of the country’s total gas production. Other natural gas production rose by about 1 %.

Most forecasts show the volume of Russian natural gas production rising by 1–2 % a year over the next few years. Gas production is largely constrained by moderate demand outlook. Russian gas production has traditionally focused on the Yamal-Nenets autonomous region in western Siberia, which features the traditional huge gas deposits. Production growth focus is shifting to the Yamal peninsula and eastern Siberia. On the Yamal peninsula, Novatek is starting a new LNG project (Arctic LNG 2), while Gazprom is developing the Kovykta gas deposit in eastern Siberia.

About a third (250 billion m3) of Russia’s gas production went to exports last year. Exports grew by nearly 6 % in 2019 on a doubling of LNG exports. The volume of gas exported by pipeline was unchanged for a year earlier. Most of Russia’s LNG production is exported, with LNG accounting for 15 % of total gas exports last year. Figures for January-September show that nearly 70 % of Russian gas exports went to EU countries, while about 15 % flowed to CIS countries. China represented less than 1 % of Russia’s gas exports. The total value of Russian gas exports last year was 50 billion dollars (3 % of GDP).

The February forecast of Russia’s finance ministry envisions an increase in gas export volume of a few percent in coming years. Transmitted gas volumes to China are being ramped up gradually with the opening of the Power of Siberia pipeline in December. Current planning calls for the pipeline to supply China with around 5 billion m³ of gas this year and 10 billion m³ next year. The coronavirus epidemic could, however, depress gas demand in China.

LNG led growth in Russian natural gas production last year

Sources: Rosstat, BOFIT.