Gazprom Looks Toward Asia LNG Expansion

Gazprom’s Chief Executive Alexei Miller spoke at a news conference on Friday, noting that the company will be doing a preliminary front-end engineering and design study on expanding their Sakhalin plant, hoping to produce 15 million tons of super-cooled liquefied natural gas, up from the current output of 10 million tons.

Reuters reports that Miller expects the expansion to be finished by the end of 2012, and also stated that the company is no longer considering a pipeline to Tokyo from the Pacific island, which would have siphoned gas from the company’s Sakhalin-2 plant. However, they will only consider LNG sales to Japan.

The Associated Free Press reports that Gazprom, a Russian-based oil company, announced the expansion by saying:

“In the near future, Gazprom will become a major player on the LNG market. The demand for LNG is growing in the traditional markets, Japan, Korea and Taiwan. There is great potential in large new consumers: India and China.”

Along with the announcement that the company is expanding their Pacific island plant, they have agreed to cut prices under an accord it will soon sign with Germany’s E.ON AG, intending to maintain volumes, despite Europe’s weakened demands. Bloomberg Business Week reports that Gazprom Deputy Chief Executive Officer Alexander Medvedev explained to reporters in Moscow that

“The price correction will help us sell gas in a competitive way. Volumes won’t be reduced.”

The company has a monopoly on LNG exports in Russia, but has agreed to cut their prices, and also apply a retroactive discount of an average of 10 percent. Under the agreements the company has already signed, they will return more than 20 billion rubles (about $600 million) to buyers in 2012, with the majority of the share going to Eni SpA, according to Deputy CEO Elena Vasilieva’s statement on Thursday.

Gazprom’s CEO noted that the new Sakhalin expansion will developed before Yamal LNG, a rival project by independent gas producer Novatek located on a field on the Arctic Yamal peninsula.