Russian state gas company Gazprom is postponing construction of a liquefied natural gas plant on the country’s Pacific Coast, as it focuses on building pipelines for gas delivery to China.
Vladivostok LNG was announced in 2013 in a bid to boost sales in Asia as the company faces regulatory pressure and competition in Europe. But Gazprom Chief Executive Alexei Miller said Friday that it was no longer a priority.
“Vladivostok LNG isn’t on the list of priority projects, and isn’t on the list of projects that will be carried out in the near future,” Miller told reporters.
By shelving the project, Gazprom is betting on the success of delivering gas to China via pipelines. Last year the company signed a contract to supply the country with hundreds of millions of dollars of natural gas after more than a decade of talks.
That deal came as Moscow sought closer ties with Asia amid increased tensions with the West over Russia’s invasion of Ukraine. Gazprom is also in talks with China on a second contract to deliver gas via another route, although there are few signs of progress in talks.
Gazprom has long sought to expand its sales in Asia. The European Union in April announced antimonopoly charges against the company for alleged abuse of its dominant position in some eastern and southern European countries’ markets. Gazprom denies any wrongdoing.
Vladivostok LNG, which was planned to launch in 2018 with capacity eventually reaching 15 million tonnes a year, is the second LNG project to be postponed by Gazprom in recent years after it shelved the giant Shtokman project in the Arctic in 2012 when cost projections soared.
Russia is the world’s second-largest natural gas producer but lags competitors on the flexible and lucrative LNG market. Russia’s second largest gas company, OAO Novatek (NVTK.MZ), is building an LNG plant in the Arctic with France’s Total SA (FP.FR). But the project has not secured all the financing it needs after the US imposed restrictions on Novatek, which is co-owned by a long-time acquaintance of Russian President Vladimir Putin.