(Reuters) – Russia will need to rethink its aim of a 20% share of the global LNG market after EU sanctions targeted equipment it needs to expand production, analysts said.
Russia had planned to reach a 20% share of the market by 2035, expanding its annual LNG output to 120 million-140 million tonnes from around 30 million tonnes now.
However, the EU’s fifth package of sanctions against Russia bars the delivery of goods and technologies required for gas liquefaction.
“The ban… jeopardises the energy strategy until 2035, according to which Russia’s share in the global LNG market was to reach 20%,” the Aton brokerage wrote in a note.
Russia’s key competitors on the global LNG market are the United States, Qatar and Australia.
Alexei Kokin from the Otkritie brokerage said the sanctions will delay new projects which use EU-sourced equipment.
“If I’m not mistaken, those are all the large-scale LNG projects in Russia,” he said, adding that it would take several years to replace the European technologies using Russian know-how.
The EU is aiming to cut its dependency on Russian gas by two-thirds this year and to end all Russian fossil fuel imports by 2027 due to what Russia calls its “special military operation” in Ukraine.
Russia supplies around 40% of Europe’s gas needs.
The Russian LNG industry had already been dealt a blow following departure from the country of Shell and ExxonMobil, which played an important role in current or future projects.
Aton analysts said that the new EU restrictions call into question the possibility of implementing new projects, such as Novatek’s Arctic LNG-2 and Gazprom’s Baltic LNG.
The first line of Arctic LNG-2 is 98% complete.
Alexei Grivach of the Moscow-based National Energy Security Fund said that Russian LNG production is “critically” reliant on imports.
“Obviously, these (sanctions) will lead to the revision of all the projects and revision of Russia’s strategy in LNG production on the whole,” he said.
Before the new wave of sanctions was introduced, Russia had said it would continue implementation of its energy projects, including Arctic LNG 2.
Gazprom, Novatek and the Energy Ministry have not responded to requests for comments.
(Reporting by Reuters)