Russia boosts Arctic LNG shipments to China to meet growing energy demand

Russian gas producer Novatek has reached an agreement to supply more than three million metric tons of liquefied natural gas (LNG) from its Arctic LNG 2 project to China over a 15-year period.

This will help China ensure its energy needs and diversify its LNG supplies, analysts say.

“Russia’s Novatek has entered Petronas’ Shanghai LNG turf, adding to a growing trend of Shanghai diversifying its LNG supply mix, where currently about 80% comes from Petroliam Nasional Berhad [Petronas]'s Malaysia complex,” Cao Lujia, an analyst at BloombergNEF was quoted as saying by China Daily.

According to Novatek Chairman Leonid Mikhelson, the Chinese market is one of the key regions in the company’s LNG marketing strategy, with Novatek planning to further increase its LNG supplies there.

“Our LNG commercial strategy is to diversify our client base and target end consumers in the fast-growing Asia-Pacific region, and the LNG volumes produced from our Arctic LNG 2 project are core to our long-term objective of delivering affordable, secure and sustainable natural gas for many decades,” Mikhelson said.

The Arctic LNG 2 is Novatek’s second plant for liquefying gas in the region, which is located on the Gydan Peninsula in Northern Siberia. The plant’s production is expected to reach 19.8 million tons per year when at full capacity.

Russia has boosted LNG exports to China in recent years, supplying almost five tons in 2020, data shows. Russia was the fifth-largest LNG supplier to China in 2020, after Australia, Malaysia, Qatar, and Indonesia.

China’s gas demand has returned faster than expected after the Covid-19 pandemic, driven mostly by the industrial sector, which has recovered to 2019 levels in May. Its average annual demand for natural gas is projected to reach 430 billion cubic meters by 2025.

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