Gazprom Proposes Adding LNG to Rouble for Gas Scheme Ifax

Gazprom Proposes Adding LNG to Rouble for Gas Scheme Ifax
The logo of Gazprom on the facade of a business center in Saint Petersburg, Russia, on March 31, 2022. Reuters
Reuters
Updated:

MOSCOW—Russian gas producer Gazprom has proposed expanding its rouble-for-gas scheme for pipeline gas to include liquefied natural gas (LNG), the Interfax news agency quoted a senior manager as saying on Monday.

The proposal from Kirill Polous, a deputy department head at Gazprom, comes after Russia moved to seize operations of the Sakhalin-2 LNG plant last week in retaliation for Western sanctions.

That order, signed by Russian President Vladimir Putin, creates a new firm that will take over all rights and obligations of Sakhalin Energy Investment Co.

Energy firm Shell and Japanese trading companies Mitsui and Mitsubishi hold just under 50 percent of Sakhalin Energy.

Russia accounts for around 8 percent of global LNG supply with 40 billion cubic metres (1412586668859.5 cubic feet) of super-cooled gas per year coming mainly from Sakhalin-2 and Novatek’s Yamal LNG, Russia’s largest LNG plant.

In March, Putin said the world’s largest natural gas producer would require countries he termed unfriendly to pay for piped gas in roubles.

A number of Gazprom’s biggest clients in Europe were cut off after refusing to abide by new rules.

“This is a question of coordinating pipeline gas exports and LNG,” Polous said, adding that there is a foreign exchange competition between the pipeline gas which is sold in roubles and LNG which is taxed in dollars.

Unlike its piped gas sales, the bulk of Russian LNG is consumed in Asia. In Europe, Spain is among the buyers of Russian LNG.

Russia last year earned $7.3 billion from LNG exports, according to the state tax service, comparing to $55.5 billion received from piped gas exports.

Neither Gazprom, nor the energy ministry replied to Reuters requests for comment.

“Pipeline gas trade with European counterparts, unfriendly counterparts, is being conducted in roubles but such measures do not cover LNG,” Polous was quoted as saying by Russia’s TASS news agency.

Before the recent conflict in Ukraine, which Moscow calls a ’special military operation', Russia had planned to produce as much as 140 million tonnes of LNG by 2035, or a quarter of current global LNG exports.

It has since suggested this target may have to be delayed.

By Jason Neely