Public Joint Stock Gazprom : Speech delivered by Alexey Miller at “Challenges and Opportunities at the Growing Energy Markets in Asia” conference (General Meeting of International Business Congress)

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September 17, 2021, 17:15

Dear ladies and gentlemen, dear colleagues, dear friends,

Economic growth means growth in energy consumption. And it is, without doubt, essential for the countries of Asia and Asia-Pacific to have an eco-friendly energy mix. This, in turn, means that their energy mix has to include a substantial share of natural gas as the most eco-friendly, reliable and affordable natural resource of all. And most importantly, it is hard to find an alternative to natural gas in terms of the extent to which the technologies of its use have been developed.

The Asian market - the market of Asia-Pacific - has an exceptionally large capacity. According to forecasts up to 2040, consumption in this region will grow by 1.5 trillion cubic meters of gas, of which 60 per cent will be imported.

There is no doubt that the Chinese market is the most dynamic and fast-growing one, and it shows simply unbelievable consumption growth rates every year. The year 2021 is no exception. In the first half of the year, natural gas consumption in China grew by 15.5 per cent. The volume of imports increased by 23.8 per cent. This means that China's projected consumption based on the results of 2021 will amount to 360 billion cubic meters, and the volume of imports will total 160 billion cubic meters. Moreover, the annual volume of gas imports is expected to reach 300 billion cubic meters as early as by 2023, in just 15 years. The figure is just staggering.

Gazprom has an extensive presence in the Asian market. We supply both liquefied natural gas and pipeline gas there. Speaking of liquefied natural gas, Gazprom is supplying LNG from its portfolio to the Republic of Korea, Japan, China, and India. The latter accounts for about a quarter of sales from our entire LNG portfolio, and these sales volumes are substantial.

But, of course, the greatest prospects are associated with continued increases in pipeline supplies to the Asian market. In this regard, it has to be noted that Russia has competitive advantages in this sphere, i.e. the competitive advantages of Gazprom in pipeline gas supplies.

Last winter, Gazprom successfully demonstrated these advantages. This means that we supply gas to the full extent and in a reliable and stable manner, just as required by our consumers, during the autumn/winter period. We know very well how to deal with seasonality, and we know how to work in the cold period of the year, in winter. And, I think, our Company is the best one in the world when it comes to these activities.

As for our pipeline supplies to China, they are growing. Today, they already total over 10 billion cubic meters of gas under the thirty-year contract. On some days, Gazprom supplies gas in excess of the contractual obligations upon request from our Chinese colleagues.

The contract is a unique one. It is the world's largest contract for gas supplies: 38 billion cubic meters of gas for 30 years. Having signed this contract, China has become one of our biggest consumers in a flash. In fact, today we can say that the cooperation between Russia and China is the cooperation between the largest producer and the largest importer.

Indeed, Russia's gas reserves - Gazprom's gas reserves - are, as you know, the largest in the world. And we are not going to have any problems with our reserves for the next 100 years. Some fields that we are currently pre-developing in the Yamal Peninsula will be active until 2132.

In Eastern Siberia, we have large fields such as Chayandinskoye and Kovyktinskoye, whose aggregate reserves amount to about 4 trillion cubic meters of gas. Only a quarter of gas from these fields has been sold to consumers - merely 1 trillion cubic meters of gas. This is why the prospects of pipeline gas supplies are undoubtedly immense.

Gas from Eastern Siberia is a multi-component gas. As you know, we have already put into operation two trains of the Amur Gas Processing Plant and a helium production facility. With a capacity of 42 billion cubic meters of gas, it is the world's second-largest gas processing plant. Thanks to the multi-component resource base of Eastern Siberia, we can produce ethane, propane, butane, pentane-hexane fraction and, crucially, helium. The amount of helium produced at the Amur Gas Processing Plant will total 60 million cubic meters of gas per year. It is the world's largest helium production facility covering a third of the global demand.

What is helium? Helium is computer chips. Helium is optical fiber. Helium is LCD monitors. Most importantly, it is the understanding that helium is used in both space technologies and modern medicine. And it is Asia that is a major and dynamic market for helium.

Apart from the resources of Eastern Siberia, Russia's largest reserves are based in Western Siberia, of course. This includes not only our traditional region, Nadym-Pur-Taz, but also a new gas production center, i.e. Yamal. Gazprom has created a new center for gas production that will be the backbone center for Russia and for our foreign consumers in many decades to come, and even in the 22nd century.

At the same time, in the course of work on a project such as Power of Siberia 2 it becomes truly evident that there is a possibility to supply gas from Western Siberia not only to the east or Russia, not only to major industrial centers in Eastern Siberia, but also for exports to the west and to the east. This is why the growth prospects of pipeline gas supplies are simply huge.

Besides, if we are talking about eco-friendliness of gas, we should also mention the environmental efforts of Gazprom. In terms of environmental efforts and low carbon footprint, Gazprom is the number one company among all the major oil-and-gas and energy companies of the world. We are extremely proud of that. I can say that we plan to hold onto this position in the future.

The demand for natural gas is growing at a very fast pace. Two points should be noted here. These include, of course, growth in absolute terms and increasing seasonality.

No matter if one believes in global warming or global cooling, we can see that over the past few years - we are talking about not some decades but the last three years specifically - seasonal fluctuations are growing in the regions to which we supply our gas. Today, the level of seasonality for Gazprom is above two.

What does that mean? It means that we have the so-called 'seesaw of Gazprom.' This is without a doubt a competitive advantage for us. In addition to simply working under preset parameters that limit our annual market volumes based on some monthly average amount of gas supplies, we can also boost out supplies. This is despite the fact that the production capacities for achieving such daily peaks usually remain unused during the year. And yet they may be in high demand for 3, 5, 10 or 12 days per year.

It should be said that our excess production capacities, which is to say, the production capacities that we secure for achieving peak production, amount to nearly 150 billion cubic meters of gas.

This is the competitive advantage: no matter how cold the winter can be and how severe the conditions can get, we always remain an extremely reliable supplier, and we always perform our contractual obligations in full.

However, as far as seasonal demand is concerned, even though we are talking about the Asian market today, the most illustrative example is Europe. Of course, the European market is connected to the Asian one. The situation with underground storages in the European Union last winter gives us plenty of food for thought.

As you know, a record-high amount of gas - 66 billion cubic meters - was withdrawn from the working gas inventories in the European Union during the winter of 2020-2021. This is an all-time record. Europe has never seen anything like it. It was caused by a cold winter. Add to that a cold spring, which lasted for a long time. As a result, the period of injecting gas into underground storages began a full three weeks later than usual in Europe. As of today, European UGS facilities are behind the injection schedule by 22.9 billion cubic meters of gas.

This is a very large figure, as you see. Indeed, given that the amounts withdrawn in the previous winter need to be 100 per cent replenished by the end of the injection period, the gap from last year is almost 23 billion cubic meters. And all experts in Europe and Asia are saying that the gap in terms of injecting gas into European UGS facilities cannot be closed. Europe is going to enter the autumn/winter period with a gas shortage in its UGS facilities. The question is, how big is the shortage going to be?

But what does this mean? This means that the current situation is affecting the prices, and we are seeing the prices in Europe breaking all kinds of records. They might even break new records very soon. What is crucial is, as we see, the Asian market is more attractive for producers and investors despite the record-breaking prices in Europe. Even in these conditions, the 'Asian premium' remains. And even in these conditions, the flows of liquefied natural gas are going to the Asian market. And even in these conditions, supplies to Asian consumers in absolute terms are higher than those to Europe.

This is why, on the one hand, the demand has grown considerably. I have outlined our expectations for the Asian region over the next 20 years, mentioning the astonishing figures of consumption and imports by China for the nearest future. We see the seasonality and growing demand for imported gas in Europe. This is why, without a doubt, as far as the green agenda and climate goals are concerned, gas is the very same resource that will become the driver of solutions to all challenges and problems that exist right now.

As you know, the Asia-Pacific region is not only very dynamic in terms of its helium market, but also more dynamic than other regions of the world in other gas sectors, such as the use of natural gas vehicles. As much as 72 per cent of the world's natural gas-fueled vehicles are based in Asia-Pacific. We should also note that the trend towards converting vessels to LNG bunkering is more prevalent there than in other regions. In this regard, the Asian region takes the lead.

All in all, my dear colleagues, we know that one can talk about gas for hours on end. The conclusion and the answer are the same: natural gas is the right solution to all challenges of sustainable development. I would like to wish the conference participants productive work. Thank you for your attention.

Information Directorate, Gazprom

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