Gazprom will receive up to RUB 111bn (US$1.7bn) from the Russian state development bank VEB to finance its Baltic LNG project in Ust-Luga near Saint Petersburg (Russia). The project is estimated at RUB 900bn (US$13.5bn). The company could also receive financial support from the Russian sovereign fund and other state banks, as financing the project alone and without any state support would prove impossible.
The 10 Mt/year Baltic LNG project was initially developed in partnership with Shell under a 2016 Memorandum of Understanding (MoU) awarding 49% in the project to the British-Dutch oil and gas company. However, Shell left the project in April 2019, after the Russian gas giant recently decided to integrate the LNG project into a large gas and LNG complex worth more than RUB 700bn (US$11bn) and to set up a 50-50 special-purpose company, RusKhimAlyans, with RusGazDobycha (National Chemical Group). Shell, like other Western companies, was also under pressure from sanctions imposed by the United States against Russia. For Gazprom, Shell's exit from the LNG project could mean limited access to Shell’s technology as well as difficulties to finance the project.
Meanwhile, Gazprom's gas exports revenues to Europe are expected to decline in 2019 after the 2018 record-high (over 200 bcm in 2018), due to sluggish demand and political factors. Gas exports to Europe could decrease to 192 bcm in 2019 and the average export price could fall by 13% to around US$125/1,000cm.
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