Gazprom cannot gain a foothold in the European LNG market without state support

The era of pipeline gas, or, in other words, the era of stability and long-term contracts, is a thing of the past. The coming time of instability needs a flexible tool that satisfies the demands of excitement and the possibility of violating an initially inviolable contract. Mobile fuel, liquefied natural gas, has such potential. Of course, the long-term strategies of energy companies are directed forward, where profit and victory in competition promise not the honesty and power of the business, but the potential for institutionalized deception and a quick response to market conditions.

Russia's Gazprom is failing with pipeline gas to the EU. Therefore, now the production of LNG for the holding is one of the priority areas of work and the only way to preserve the Western market. However, so far, the expansion is going very mediocre: demand is falling, as is the cost of raw materials, competition is huge (including domestic, with export supplies from Novatek), production volumes are too small, the tanker fleet consists of only a few ships.



A new LNG plant is currently operating in Eastern Russia as part of the Sakhalin-2 project. In the North-West of the country, in September 2022, a medium-tonnage complex for the production, storage and shipment of LNG was launched near the Portovaya compressor station.

The company's management had high hopes for it, but the time chosen to enter the liquefied raw materials market (especially against the backdrop of problems on the Ukrainian transit route and the destruction of Nord Streams) turned out to be not the most successful. Given the weak sales, Gazprom decided to blame Europe for the destruction of the industry market.

According to the company's management, this year, in the face of a significant European premium relative to Asian prices, some suppliers violated their obligations under long-term contracts and redirected LNG tankers to Europe, which provoked crisis situations in a number of countries in the Asia-Pacific region.

The “resentment” of the representatives of the energy company is understandable - Gazprom has developed a habit of many years of “calm” business in the EU with huge monopoly supplies and the image of a respected long-term partner, which they cannot do without. With the entry into the market of a priori unstable LNG supplies, the company faced new circumstances for itself - market volatility and capriciousness of buyers.

And nothing can be done about it, everyone faces similar phenomena, including suppliers from the United States, with only one exception - their problems and failures are compensated by the political power of Washington. Russian Gazprom currently lacks such state support abroad, and it is becoming more and more difficult to enter and gain a foothold in the global LNG market.