Gazprom's Ust Luga LNG won't compete with pipeline gas

MOSCOW: Output from Gazprom's planned Ust Luga LNG liquefied natural gas plant would not be sold to counties which buy pipeline gas from the Russian state company, brokerage BCS said in a note on Friday after a call with Gazprom's management.

Russia, which currently has two LNG plants - on Sakhalin island in the Pacific ocean and Yamal LNG in the Arctic - has said that LNG exports will never be in competition with its pipeline gas, which only Gazprom can export.

But the head of the energy committee in Russia's lower house of parliament said last week that privately-owned Yamal LNG, the country's flagship LNG project, was challenging Gazprom in its core European market, and should either be taxed or have a limit put on its sales there.

"Ust Luga LNG...with confirmed capital expenditures of 750 billion roubles ($10 billion), will target select EU markets, e.g. Portugal, Spain, in order not to compete head-to-head with Gazprom's pipeline exports," BCS said in a note, adding it had held a call with Gazprom's management.

Gazprom, which has pipelines running to western and southern Europe but not the entire European Union, did not immediately reply to a Reuters request for a comment.

Russia plans to triple LNG production to some 140 million tonnes annually by 2035. Gazprom wants to launch the Ust Luga plant, yet to be built on the Baltic sea coast, after 2023.

Gazprom is the largest gas supplier to Europe with a 33% share as of last year, and the rest coming from Norway, Algeria, the United States and others.

After years of denying there was a risk of Russian gas rivalry in Europe, Gazprom said in its Eurobond prospectus last month: "There can be no assurance that the LNG produced by this project (Yamal LNG) ... or other similar projects that could be launched ... in Russia ... will not compete with our pipeline gas."