Rosneft wants to export Arctic natural gas. Russian legislators say no.

The Energy Committee of the State Duma cited concerns that Pechora LNG exports could undermine the state gas monopoly Gazprom's position in the European market.

By Atle Staalesen, The Independent Barents Observer - February 13, 2018
The shadow of a worker is seen next to a logo of Russia’s Rosneft oil company at the central processing facility of the Rosneft-owned Priobskoye oil field outside the West Siberian city of Nefteyugansk, Russia, August 4, 2016. (Sergei Karpukhin / Reuters File Photo)

The Energy Committee in the State Duma, the lower house of the Russian parliament, has concluded that Rosneft should not be allowed to export natural gas. The state company had requested permission to export liquefied natural gas from its projected Pechora LNG plant.

According to the legislators, an export permission to Rosneft could result in enhanced competition between Russian companies in the lucrative European energy market and consequently be in conflict with the interests of Gazprom, the Russian natural gas monopoly company.

“This would contradict with the strategic interests of the country in the field of energy policy,” the committee says in a statement.

Rosneft has over the last years acquired a major number of new production licenses and boosted its reserves of natural gas both onshore and offshore. However, without the export permission, the the company will not be able to sell it abroad.

Rosneft argues that the federal law on gas exports should be liberalized. In 2013, legislators allowed Novatek to export LNG from its grand new project in Yamal. However, further liberalisations should not be conducted, the Energy Committee says.

The committee members argue that Gazprom’s pipeline gas brings far more revenues to the state budget than LNG since the latter is exempted both export tax and mineral exploration tax. In addition, the pipeline projects can be developed with equipment and technology exclusively produced in Russia, while the LNG projects require major imports from abroad.

In 2014, Rosneft struck a deal with Dmitry Bosov and his company Alltech on the joint development of natural gas resources in the Nenets Autonomous Okrug, the oil and gas-rich Arctic region. Later, it acquired a controlling stake in the project. The Pechora LNG is planned to be based on the resources of the Kumzhinskoye and Korovinskoye fields. However, the plant could possibly include also other onshore and offshore resources.

The projected Pechora LNG will produce an estimated four million tons per year, most of it planned shipped to western markets. Investments are estimated to about $4 billion, the project website informs. The project developers intend to build a new port terminal on the Pechora Sea coast and construct several LNG carriers.

The decision of the State Duma legislators could ultimately jeopardize plans for the Pechora LNG project.