Advances in Social Science, Education and Humanities Research, volume 273 International Conference on Communicative Strategies of Information Society (CSIS 2018) Current State and Prospects of Interaction Between Russia and Baltic Sea Region in LNG Market Podolyanets L.A. Veselova Yu.A. Department of Economics of Accounting and Finance Department of Economics of Accounting and Finance Saint-Petersburg mining University Saint-Petersburg mining University Saint-Petersburg, Russia Saint-Petersburg, Russia AbstractThe LNG market is characterized by growth and confirmed by successful development of the “Northern volatility, change of operating conditions. The Baltic states create Measurement” program among the EU, Russia, Norway and a gas infrastructure of LNG which is independent of the Russian Iceland. It has been established not only for sale of the Russian Federation. Russia has not created the complex strategy of LNG resources, but also for cooperation between the countries of production and export. The research objective is to study the role of the Russian LNG export in the Baltic Sea region, assessment of Northern Europe. The authors are based on the transformation the Russian possible prospects in the LNG market. The main of the relations to the LNG market from communication results of the research include the following: defining competitive between the EU and Russia into two directions. advantage of Russia in the Baltic Sea region; determining According to the authors' opinion the research of the LNG prospects of creating essential infrastructure of LNG production in the Northwest region of Russia. The Russian Federation has market should be done taking into consideration not only competitive advantages due to short delivery distances, good regulatory and business practice formed in the process of relationships with the majority of the Baltic states; price cooperation between Russia and EU, but also relations of advantages; considerable export potential due to the possibility of interaction between the EU-Baltic Europe and Baltic Europe – developing the system of the LNG mini-plants destroying “Northern measurement”. monopoly of the Russian gas exporters. Thus it will allow one to improve the Russian-European relationship in accordance with The authors' hypothesis is focused on experts opinions that the possibility of implementing the Third Energy Package of the the Baltic Europe and “Northern measurement” are the special EU (2009). The theoretical and practical importance of the metaregions for providing safety and stability based on research is defined by the described tendencies and prospects of principles of the Partnership and Cooperation Agreement the LNG Baltic market development with the Russian Federation between Russia and the EU. In spite of deterioration in the cooperation. They can be used for forming strategic programs relations, the issue of energy security is significant for all including implementation of the LNG projects by the Russian participants. For the countries of the Baltic region it is companies and incentivized investors. Participation of the Russian Federation in the LNG market of the Baltic Sea region is possible, connected with the fears caused by dependence on the Russian mutually beneficial and commercially reasonable. gas supply. Though for Russia it is associated with “safety of demand” - necessity to obtain gas sale guarantees. In this case Keywordsliquefied natural gas (LNG), export, Baltic sea the LNG market is unique as, unlike pipeline gas, the above- region stated contradictions are not so strict. The Baltic countries can replace the main LNG supplier without any serious I. INTRODUCTION consequences. Whereas Russia can use other customers in the The geographical location, resource endowment of Russia case of adverse trading conditions. Thus, it is possible to speak and financial technological capabilities of the EU have caused about reducing the political component in these relations and strong trade connection between them which can not be consider only economy of the competitive market. Particularly destroyed in short terms without enormous losses for all we take into account the situation with the LNG market taking participants. The relationships are exposed to strong negative place in recent years and having impact on development of the impact from the different parties in which both economic and situation in the Baltic region. political aspects, and the interests of various beneficiaries are High uncertainty and volatility of LNG market are limiting mixed. In such conditions it seems to be relevant to do the factors in the research of the topic. research of the current state and to justify possible development prospects of one of the new volatile markets in the region in LNG location with field distribution and a focus on Europe which many issues and contradictions as well as a high share of are gaining importance at the present time. LNG market is uncertainty have been presented. According to the authors' divided into gas fields where gas is produced. The biggest ones opinion, the market of LNG in the Baltic region can be regarded are the Pacific and the Atlantic gas fields. The biggest part of as the market taking into account interests and deliveries of production comes from the Middle East where the main Russia. The authors try to carry out their research in the most reserves are concentrated in Iran, Russia, Qatar, Turkmenistan, pragmatic direction but considering growth of negative factors, and countries of the Middle East. The development of gas- which are mostly political ones. The choice of the Baltic region carrier industry is stimulated by the development of new for the research is caused by its functioning features which are deposits and the growing production at the existing ones [12]. quite different from the EU. So it has created the “Baltic In the Baltic countries, LNG import growth is caused by an Europe” concept. The positive cooperative experience of effort to provide a variety of energy supply and, as a result, to Russia and the Baltic region in the Post-Soviet time is develop alternative routes of gas transportation. A short- Copyright © 2019, the Authors. Published by Atlantis Press. This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/). 193 Advances in Social Science, Education and Humanities Research, volume 273 distance marine transportation and potential LNG demand are a alternative ways of transportation and weaken dependence on decisive factor for all countries. Large marine terminals are Russia [19]. expected to be constructed in Denmark, Norway, Sweden, and It is expected that large-scale terminals will have been Finland by 2020. Furthermore, investment into other large-scale installed in Denmark, Norway, Sweden, and Finland by 2020. projects, such as LNG bunker terminals in Germany, Belgium, Besides, it is planned to make investments into large-scale and the Netherlands, which will assist the already existing LNG projects such as LNG-bunker terminals in Germany, Belgium terminals, are planned [17]. and the Netherlands which will supplement the existing LNG Political and economic challenges of energy security at the storage terminals [17]. developing LNG market deserve a scientific investigation. The features of Russian strategy on the LNG market of the According to some research, American LNG will play an Baltic region are also considered to be up to date [19]. important part on the European energy market in the future. Washington is planning to facilitate shipping terms for The prospects of the LNG market development will be American LNG exporters to Eastern and Central Europe. The connected with elaboration of the environmental legislation. strategic mission is to decrease energy dependence of these The LNG market development is stimulated by environmental regions from Russian supplies, both by land and under the legislation, new applications and expansion of LNG use in Baltic Sea (Nord Stream). The American government is small scales. Natural gas will also compete with coal because planning to use the rapidly developing national gas reserves as of its advantage of being used as back-up fuel for renewable a “political instrument” [13]. sources of energy. It is mostly used for microgeneration of energy and heat as well as fuel for trucks, public transport and A globalization of economic relations between the Baltic railroads. Wider spread availability of LNG, lower States after launching a floating LNG terminal in Lithuania is transportation costs and development of the LNG small planned. The Baltic States are considering investment transport parks allow to carry out LNG deliveries of smaller alternatives. The terminal will make a considerable impact on volumes to the local markets which are not included in gas gas prices. Lithuania is planning to export gas to other Baltic network. Not only regional importers, but also such exporters States [16]. as Russia want to use this tendency[18]. Both Russia and EU have a number of LNG projects in the Further development of the gas market will influence price Baltic Sea. These projects involve gas supplies to the Baltic formation in this sector. One of the most important tendencies States as alternative ways of gas transportation, thus reducing in European gas wholesale markets of the recent years has been energy dependence on Russia. Russian LNG terminals are active replacement of the price formation mechanisms meant for supplies to Asian markets, which are not receiving dominating earlier. First of all oil indexation (because of a natural gas at present, or could alternatively transport gas to significant role of “Gazprom” long-term contracts dealing with Kaliningrad. The Baltic projects of EU are based on geopolitical such mechanism) is due to price formation development on the grounds. However, they are attractive for the market. The main basis of the competition “gas — gas” on gas hubs. The target obstacle here is a lack of a joint project, while every EU member gas market model for Europe means domination of this price country is wishing to get profit from their own LNG enterprise formation mechanism, and it is presented by the European [19].