The state-owned Russian gas giant Gazprom expects the considerable rise in LNG production this year to be matched by an increase in gas consumption, with the new LNG volumes going to the premium Asian markets, Kommersant reported on February 27.

The gas monopoly does not expect heavy competition with LNG on the European market, the paper writes. The share of LNG use in Europe has grown, but currently LNG only makes up about 11% of total consumption, according to Gazprom.

Gazprom's head Alexey Miller earlier said that the company increased its gas output by 5.4% to 497.6bn cubic metres (cm) in 2018, and gas export by 3.4% to 201bn cm. Gazprom expects gas exports to Europe at 200bn cm in 2019, the company says.

Gazprom may increase its output by 80bn-115bn cm by 2035 thanks to developing projects in new regions, board member Oleg Aksyutin said on February 26. But most of the increase will be going to China as the new Power of Siberia pipeline comes online at the end of this year.

Gazprom estimates that its share of the European gas market grew to 36.7% in 2018, from 34.2% in 2017, amid lower production in the region. At the same time Gazprom's average gas price grew by 24.6% in 2018 and reached $245.5 for 1,000 cm. The company expects natural gas prices in Europe this year to average $230-250/kcm.

“We believe that Gazprom will remain the most price competitive gas supplier, and therefore do not expect a significant drop in gas export volumes due to the increase in LNG production. Nevertheless, growing LNG production could potentially reduce supply margins, bringing gas prices down,” Ekaterina Rodina of VTB Capital (VTBC) said in a note.

“We note that the LNG and gas prices have fallen considerably of late, to $6.2/mmbtu (-45% since September 2018) and $5.8/mmbtu (-43% since the peak in September 2018) in Asia and Europe, respectively. Overall, we deem the news as not market-moving for the name for now,” Rodina added.