WGI: What is GGLNG’s target sales volume in 2011, and where have you been selling?
Barnaud: First point: We are not driven by volumes. We don’t compete on volumes. But I think this year we will trade about 2.5 million-3 million tons. Sakhalin equity will probably be less than half, with the rest from Egypt, Nigeria, Qatar and Australia plus some [US] reloads. This year we have been very successful across Asia, marketing directly into Kuwait, Thailand and more traditional markets like Japan, Korea, Taiwan, China and India. But nothing yet into Europe. A significant part of our LNG supply is Asian — from Sakhalin. The rest remains flexible because of our successful participation in spot tenders and our strong shipping position — but [we’re] still keeping a big focus on supplying Asian markets.
WGI: Do you see the gap between Asian and European LNG prices widening further?
Barnaud: We already see spot prices in Asia at [the level of] long-term prices there and it’s probable that they will go slightly higher this winter.
WGI: Is GGLNG arbitraging all Atlantic volume into Asia?
Barnaud: It’s not that we don’t like Europe or don’t want to supply LNG there — let’s be very clear. But today both demand and margins are in Asia. If this winter, demand peaks in Europe and matches our expectations to keep some — maybe Egyptian — cargoes in Europe, then we will do it. But nowadays we don’t do much business in Europe or in the Atlantic Basin.
WGI: Where does Gazprom have import capacities?
Barnaud: We have long-term regas capacity at Sempra’s Costa Azul in West Mexico [about 1 million tons per year] but with current US prices, [Sakhalin] volume is being diverted away. We have ended a short-term agreement with Petronas at the [UK terminal] Dragon, but keep the ability to import LNG in Northwest Europe using third-party-access mechanisms. We have a good relationship with Sempra allowing us to put cargoes into Cameron LNG [in the US Gulf], but this has not been used.
WGI: How have events at Fukushima this March changed GGLNG’s operations?
Barnaud: There are still many uncertainties over the economy. But natural gas is very well placed and there is lots of it. So it is our duty as an industry to make sure that it transforms into contracts and developments. We have certainly changed, or accelerated, some of our planned long-term utilization of Gazprom gas reserves — we talk about Shtokman, and possible Far Eastern gas and LNG developments. Over the past six months, we have actively supplied Japan to mitigate the effects of the dramatic events there, as well as the booming economies of China and India.
WGI: What advice do you have for Gazprom on the merits of holding the line on oil-indexation in Europe?
Barnaud: I don’t have any advice. GGLNG is the arm of Gazprom in the LNG markets, so we aggregate a lot of information. LNG forces you to get a view of the world gas markets, and so we take that back to our colleagues in Moscow. It doesn’t mean we own the truth. We contribute to the debate: in real time and, importantly, on a 30- or 50-year horizon. On spot versus oil indexation in Europe, I can’t comment. But LNG provides a global perspective, and it’s better to get that by being an active player.
WGI: What total volume does GGLNG hope to tie up?
Barnaud: Over the next 5-10 years, we have and we will place in the market Shtokman Phase 1, 2 and 3. We will also place in the market the Sakhalin-2 expansion. So we are talking approximately 35 million tons/yr. And there’s Yamal. But I can’t say more on that than was announced in June (WGI Feb.3’11,p1).
WGI: Have any of GGLNG’s preliminary deals with Indian companies been finalized?
Barnaud: We see India as a strong market, with a quickly growing customer base ... and [there’s] an excellent case for LNG supply there. Our negotiations are up to detailed sales and purchase agreement level, and all the pricing is indexed to oil. We’ll finalize them in the weeks and months ahead.
WGI: What preparations are there for Shtokman LNG marketing? Are you still targeting a final investment decision (FID) late this year for first LNG in 2017?
Barnaud: That’s the plan developed by Shtokman Development AG. On our side, we’re engaged in significant commercial efforts, and therefore we will be on time for the project FID. The project shape hasn’t changed.
WGI: Could Shtokman LNG marketing be handled by Total or Statoil rather than Gazprom?
Barnaud: No. The agreements do not authorize anyone else[other than Gazprom].
WGI: To the extent you target continental Europe with any Shtokman LNG, will you aim for prices broadly equivalent to those Gazprom obtains for pipeline gas?
Barnaud: Today the appetite for LNG is beyond Europe. Europe is relatively well supplied. Initially there was strong willingness to supply the US with Shtokman LNG. But US prices are not so attractive today. We will achieve a marketing mix that enables positive FID.
WGI: How will the balance of Gazprom’s exports between piped gas and LNG be affected by new pipelines such as South Stream, the Altai pipe to China and a possible line to Korea (p1)?
Barnaud: It is fundamental to build a strategic vision for the next 30 to 50 years. In the short term, we remain pragmatic and don’t exclude anything. For example, one of our priorities is to conclude pipeline negotiations with our Chinese partners, but we also do supply Chinese buyers with spot LNG.