At present, the situation in Ukraine is a hot spot of concern for everyone, Western countries have opened unprecedented comprehensive economic sanctions against Russia, such sanctions involve unprecedented fields and intensity, in the face of the strong economic influence of the Western world, Russia is not without the power to fight back, energy is the trump card in Russia's hands. Based on its own vast territory and extremely rich natural resources, Russia is very important in the global natural gas and oil market, 40% of the natural gas and 30% of the oil in the European market are dependent on imports from Russia, so although European countries have opened comprehensive economic sanctions against Russia, the content of sanctions seems to be all-encompassing, but it is not afraid to include natural gas and oil, it is because Russia's two resources are too important to Europe, especially natural gas, and now the European market has appeared a huge panic, Natural gas prices are rising at a rate of day-to-day. However, Europe does not dare to cut off natural gas imports from Russia now, does not mean that it will not do so tomorrow, the EU called the suspension of the Nord Stream 2 gas pipeline, indicating the determination of European countries to reduce their dependence on Russia's energy in the future.
As we said on previous shows, Russia is aware of the seriousness of the problem and wants to reduce its dependence on the European market and avoid geopolitical risks in advance. Therefore, Russia has long put forward a two-way strategy of energy exports, while maintaining and developing the European market, actively developing the Asia-Pacific market and developing the global market. Now the situation in Ukraine has developed to this day, not to mention the development of the European market, that is, it is very difficult to maintain, and the pressure on Russian gas to find markets in other parts of the world is unprecedented.
If you look at the demand, the global natural gas market is indeed very large, the size of the Asia-Pacific market is not inferior to the European market, and the consumption potential is much greater than that of Europe. However, the problem is not that there is a demand, it can find a market for Russian gas, which, unlike oil, can be transported directly by pipeline or by sea on a large scale, and the transmission of natural gas is limited by the conditions of the facility. There are two main ways of transporting natural gas, one is pipeline natural gas, the use of pipelines to transport natural gas from the place of origin to the consumer market, the other is liquefied natural gas, first the extracted natural gas liquefaction treatment, and then the use of liquefied natural gas transport ships, transported to the consumer market. Now Russia's natural gas exports are highly dependent on pipeline gas, using a gas pipeline network that began to be built as early as the Soviet era to transport natural gas directly to Europe. Even in Asia, Russia exports natural gas to China mainly through the China-Russia Eastern Route gas pipeline. However, while Russia exports natural gas to old European customers through pipelines, the global natural gas market is undergoing profound changes, and the development of liquefied natural gas is very rapid, and the natural gas producing countries represented by the United States and Qatar have growing LNG production capacity. Liquefied natural gas is not subject to the laying of pipelines, as long as it can be navigable by sea and land, it can be transported by giant natural gas ships, no longer subject to pipelines, and can easily cover the global natural gas consumption market. Therefore, before the outbreak of the Crisis in Ukraine, Russia had already put the development of its own LNG industry on a strategic level. During the Russian Energy Week in October 2019, Putin said that Russia's LNG capacity will reach 120 million to 140 million tons by 2035, by which time Russia will be among the top three global LNG exporters. When Putin made these remarks, he probably did not expect the situation to develop so quickly.
Now Russia's two oil and gas giants, Gazprom and Rosneft, are accelerating the layout of LNG projects. Gazprom plans to add a 5.8 million-ton production line to the Sakhalin 2 LNG project in the Far East, while planning to build a natural gas liquefaction plant with an annual capacity of 13 million tons at the port of Ustrogo. However, at the forefront of LNG capacity construction, and most successfully, Russia's largest independent gas producer, Novatek, has begun construction of the Arctic No. 2 LNG project, which has three production lines with a total design capacity of up to 19.8 million tons per year, of which the first production line will be put into operation in 2023. The Arctic 1 LNG project, which also has a total capacity of 19.8 million tonnes per year, will also begin construction after 2025.
In addition to these projects under construction, the Yamal project operated by Novatek has been hailed as a model for global LNG projects, which is supported by Total, the Chinese buyer PetroChina is a shareholder, and has received financing support from the Silk Road Fund, which has been very successful in both the operating model and cost control, and the fourth production line in its LNG project has been put into operation in 2020, although the production capacity of this line is only 900,000 tons per year. However, this is a production line that completely relies on Russia's own independent technology and equipment construction, which can not only reduce costs, but also the localization attribute of this production line is more important in today's blockade of Western technology and equipment.
Russia has accelerated the construction of LNG capacity in recent years, but the proportion of LNG is still too low compared to pipeline natural gas. In 2020, as the world's largest natural gas exporter, Russia exported a total of 230 billion cubic meters of natural gas, of which only 40.4 billion cubic meters of liquefied natural gas, at the same time, the European market imported a total of 326 billion cubic meters of natural gas in 2020, of which 35% are liquefied natural gas, this year China imported 47.6 billion cubic meters of pipeline natural gas, imported 92.6 billion cubic meters of liquefied natural gas, 70% are liquefied natural gas, which can be seen in the main consumer markets. LNG has been on an equal footing with pipeline gas, and has even surpassed pipeline gas. Russia's LNG production capacity is still far from keeping up with the demand of the international market.
In the future, in the face of great changes in the international energy market situation, the construction of LNG projects in Russia will undoubtedly be further accelerated, helping Russia to quickly open up the global gas export market and hedge the crisis and uncertainty facing the European market.