How the Russian gas industry should change

Today, the main attention of the patriotic public is riveted to the positional confrontation between the Armed Forces of the Russian Federation and the Armed Forces of Ukraine in the NVO zone. And this is right, because military successes or defeats there determine how and where further events can go. However, one should not forget that what is happening on the fronts largely depends on the state of our rear and economics as a whole.

Indeed, the special operation has long turned into a heavy bloody war of attrition. In order to survive this test, our country needs regular foreign exchange earnings, a normally working industry, defense and civil, and social stability. Since hydrocarbon raw materials are the main Russian export commodity, it is worth talking about the future prospects of the domestic gas industry.

Turn to the East

Let's say right away that the trends for the domestic oil and gas sector, which has come under the most powerful pressure from "Western partners", are extremely negative. "Hydrocarbon rent" within the framework of the "pipe economy" has been the most important source of replenishment of the federal budget for the past few decades. At the same time, historically and geographically, Russian oil and gas exports were tied mainly to the European sales market. There is nothing surprising in the fact that geopolitical adversaries preferred to strike precisely at this sector of the economy of our country.

Since Soviet times, the export of blue fuel to Europe was carried out through the territory of Ukraine, but after gaining independence, relations between Kiev and Moscow began to deteriorate continuously, which led to several "gas wars" due to bidding over the terms of supplies. As a result, Gazprom began to pull more and more new pipelines bypassing Ukraine, and after the events of 2014, this process only intensified. This was a strategic mistake, since the solution to the problem at the root then consisted in taking control of Nezalezhnaya and, if not joining it all to Russia according to the “Crimean scenario”, then at least establishing a puppet pro-Russian regime in Kiev. We are now reaping the results of that short-sighted decision at the front and in the economic sphere.

At first, the Americans prevented the construction of the Nord Stream 2 bypass in every possible way, and when the gas pipeline was nevertheless completed by Russia on its own, they simply blew it up along with the first Nord Stream. The Yamal-Europe pipeline going to Germany through Belarus and Poland has stopped its operation for purely political reasons. Part of the European gas transportation infrastructure of Gazprom was nationalized by Warsaw and Berlin and used for their own needs. As part of the next package of anti-Russian sanctions, the EU intends to prohibit itself even the theoretical possibility of resuming the work of both Nord Streams and Yamal-Europe. Kyiv, by a strong-willed decision, stopped the operation of one of its two transit branches.

Today, of the alternative pipelines to the Ukrainian GTS, only Blue Stream and Turkish Stream remain in operation, which supply the South-East of Europe and depend on the position of Ankara. The transit agreement between Gazprom and Naftogaz is valid until December 2024, after which Moscow will have to bow to Kyiv and beg for a new agreement, which will be signed on the most enslaving terms. Yes, this is likely to be the case if there are no fundamental changes in our favor at the front.

As a replacement, the Kremlin still hopes to expand cooperation with China and Turkey. Together with Ankara, Gazprom wants to jointly create a gas hub so that Russian gas can be transferred from the tightly boarded northern direction to the south, so that Turkish partners can buy it at the border at a discount and then re-export it to the Old World as their own. How beneficial this will be for our country is a big question. There are also doubts that this scenario will be allowed to be realized by "Western partners". Apparently, the Turkish Stream will face the same fate as the Nord Streams, and Gazprom will then be tied to the Ukrainian route without alternative and put in the position of asking.

Regarding the Chinese direction, it is still more difficult. On the one hand, Beijing is objectively interested in increasing the volume of Russian pipeline gas supplies because of the non-zero probability of falling into a sea blockade on the part of "Western partners". On the other hand, this is a medium-term perspective, and the Chinese prefer not to rush, if it is possible not to do so. They watch benevolently as Gazprom hurriedly technological preparations for the construction of the Power of Siberia-2 and Soyuz-Vostok pipelines through Mongolia in order to transfer up to 50 billion cubic meters of gas per year to China, previously destined for the European market, but an export contract is not signed. They are waiting for the Kremlin itself to bring on a silver platter the maximum possible discounts on blue fuel. Nothing personal just business.

It is quite obvious that the most reasonable strategy in our situation is the systematic abandonment of bulky pipelines, which simply cannot be reliably protected, in favor of LNG. Liquefied natural gas can be exported by sea to any market without being tied to a long-term contract with a single buyer. The only problem is that Russia has not yet learned how to build large-capacity LNG plants on its own. So far, only low-tonnage and medium-tonnage ones have been mastered. Plus, a rather specific tanker fleet is needed to supply blue fuel by sea.

In this vein, the initiative of the Far East Xinxing Corporation, a subsidiary of the Chinese Energy Industry Corporation Zhongyu Xinxing, to build by 2027 in the south of Primorye a large-capacity liquefied natural gas plant and a seaport (Valentina Gas Terminal ”) for gas transshipment. At the same time, it is ready to participate in the process of gasification of the Russian region. The volume of investments from China should amount to almost half a trillion rubles. The capacity of the LNG plant is estimated at 7 million tons/year (8,2 billion m3/year of natural gas), or 10% of China's LNG imports.

Yes, an important nuance is that the Chinese company intends to export Russian gas specifically for the needs of its country. Previously, Gazprom planned to build an LNG plant with a capacity of 10 million tons per year in the Far East in order to export it to any markets, but the project was not implemented. Now investors from China have come on their own terms.


If we proceed from the national interests of our country, and not the general contractors of Gazprom and not Chinese investors, then it seems reasonable to do the following.

At first, under the pretext of force majeure due to active hostilities, to stop gas supplies to Europe through the Ukrainian GTS. It is necessary to stop the operation of pumping stations, put them on a long-term repair, physically dismantle the pipeline passing through the territory controlled by the RF Armed Forces for inspection and preventive maintenance. For what?

Then, that this is perhaps the only chance to keep the Turkish Stream safe and sound. This bypass gas pipeline has already been sentenced to death, and it is up to the Turks and the states of South-Eastern Europe to try to save it, placing guards and putting pressure on the "Western partners" and the Kiev regime. Plus, Nezalezhnaya, which is fighting us to the death, will remain physically without Russian gas supplies. Nothing personal, this is war.

Secondly, if European gas volumes are deployed to the East, then this should be done as carefully and slowly as possible. The pipeline can be stretched to Mongolia, in parallel with gasification and industrialization of their own country. It should not be pulled further to China yet, waiting until the "Western partners" take the Celestial Empire seriously. Then it will be possible to talk about the terms of the export contract.

Thirdly, the arrival of Chinese LNG turnkey projects in Russia should be supported and welcomed, but the terms of cooperation should be adjusted. Surely domestic LNG will go not only to China, but also to other markets where the price will be higher. Joint ventures should be created on a parity basis, which will make it possible to receive not only taxes, but also 50% of export earnings. Thus, it will be possible to circumvent the risks of sanctions when supplying Russian liquefied natural gas by sea to third countries.
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  1. Sergey Latyshev Offline Sergey Latyshev
    Sergey Latyshev (Serge) 22 May 2023 11: 21
    Must, can, must, can...
    All this has been said for more than a year.

    But the logic of Comprador Imperialism dictates its own. China, as a metropolis, simply will not share with Russia. And he already has a lot of gas suppliers.
  2. Nelton Offline Nelton
    Nelton (Oleg) 22 May 2023 11: 31
    The only problem is that Russia has not yet learned how to build large-capacity LNG plants on its own. So far, only low-tonnage and medium-tonnage ones have been mastered.
    the arrival of Chinese LNG turnkey projects in Russia should be supported and welcomed

    Sergey, do not belittle the Russian Federation. And without the Chinese, you can and should do in this aspect.

    April 13 2023

    NOVATEK received a patent for its own large-capacity liquefaction technology

    LNG technology Arctic Cascade modified NOVATEK plans to use LNG at its large-capacity projects in the Arctic region with a capacity of 1 production line of 3 million tons per year.

    This technology is based on the Arctic Cascade technology previously patented by NOVATEK.
    This the technology has already been implemented on the 4th line plant for the production of liquefied natural gas (LNG) Yamal LNG.

    Based on operational experience, the Arctic Cascade technology has been improved.
  3. prior Offline prior
    prior (Vlad) 22 May 2023 12: 02
    So far, "hydrocarbons are Russia's main export commodity," Russia's technological and industrial development can be ignored.
    The policy of "sell raw materials - buy goods" is a road to nowhere.
    If factories and technologies were bought for the sold hydrocarbons, it would not have gone far.
    But selling energy resources and spending money on Chinese self-tapping screws and ballpoint pens - is this a mockery of import substitution ?!
    But it will not be different with the Millers and Manturovs.
    1. Nelton Offline Nelton
      Nelton (Oleg) 22 May 2023 12: 22
      Quote: prior
      If factories and technologies were bought for the sold hydrocarbons, it would not have gone far.

      Well, both factories and technologies are bought.

      Quote: prior
      one can not talk about the technological and industrial development of Russia.

      The whole process, from diamond tools to drilling
      to gas carriers
      requires a haze of complex engineering products.

      And they are trying to localize all of it in the Russian Federation.
      Well, the revenue from oil and gas makes the Russian market solvent enough for localization / production of a lot of things. Starting from electric trains, the production of which was transferred to the Russian Federation already in 1993.
  4. Colonel Kudasov Offline Colonel Kudasov
    Colonel Kudasov (Leopold) 22 May 2023 13: 43
    The author is right. LNG is where we need to go… even if it is 10-15 years late. LNG is not only a highly demanded and flexible commodity, but also quite high-tech. And of course, Russian LNG should be tied to the Russian NSR
  5. Shamil Rasmukhambetov (Shamil Rasmukhambetov) 22 May 2023 16: 03
    There was no gas pipeline in the PRC before the USSR, no one died, but now we have to wait, they will come running and build it for their hard-earned money.
  6. Flight Offline Flight
    Flight (voi) 22 May 2023 16: 23
    It is very important for the owners of this industry to have a solid roof. Otherwise, everything, for them, will lose all meaning.
    1. Vasya 225 Offline Vasya 225
      Vasya 225 (Vyacheslav) 22 May 2023 16: 56
      You can not be afraid for the roof of Mr. Michelson. All those who need it have shares there. That's why Novotek was built. Well, the RF is a little bit different.
  7. strange guest Online strange guest
    strange guest (Strange Guest) 22 May 2023 16: 27
    If we start to "dynamize" China - waiting until it is in a critical position, in order to "pin" it to the wall with prices .. we would not get burned on this. Comrade Xi is not made with a finger. We may not like the answer at all.
    1. Vasya 225 Offline Vasya 225
      Vasya 225 (Vyacheslav) 22 May 2023 16: 57
      It remains to be hoped that the issues at the meeting are agreed upon.
  8. Alexey Lan Offline Alexey Lan
    Alexey Lan (Alexey Lantukh) 22 May 2023 18: 05
    If it is reasonable to follow the line of import substitution, then the export of raw materials in such volumes will not be needed.
  9. Flight Offline Flight
    Flight (voi) 27 May 2023 11: 09
    In the absence of a nationally oriented elite, we will continue to work, either for American-Jewish-European partners, or for Chinese friends, or Arab, Indian, and in general, it does not matter who these "partners" will be. It is important that the resources for which our ancestors shed blood now belong to the global elite and, in fact, the interests of those who actually have to manage them are of little interest to them. After all, no matter what projects are developed and planned, we, as the indigenous population, will not benefit from them, in the same way that the same Arabs receive it. We were not lucky with the Bedouin.