Page 5 - FSUOGM Week 31

FSUOGM COMMENTARY FSUOGM

even greater capacity of 19.8mn tpy. It wants to has been pushed again to the fourth quarter,
expand production to as much as 70mn tpy by Gyetvay confirmed, with commissioning due to
2030, with a raft of other projects at the planning start shortly after that. The 0.9mn tpy plant was
phase. originally due on stream by the end of 2019, but
Commenting on the global LNG market, the start date was postponed to the second quar-
Gyetvay noted that LNG imports in the second ter of this year, and later the third quarter.
quarter were roughly comparable to those in the Despite its small size compared with Yamal
same period last year, at 88mn tonnes. Imports LNG’s three operational 5.5mn tpy trains, the
by China, which is among the main recipients fourth train is important, as Novatek will be
of Yamal LNG’s gas, surged 21% y/y to 17mn deploying its very own liquefaction capacity,
tonnes. known as Arctic Cascade, for the first time. If
Chinese demand for imports is expected to the technology proves a success it will be used at
be strong during the remainder of the year, Gyet- the 5mn tpy Obsky LNG plant, which Novatek
vay said, as its economy steadily recovers from wants to build without foreign partners.
COVID-19 lockdowns. Full-year supplies are The gas firm is yet to take a final investment
anticipated to reach 65mn tonnes. decision (FID) on Obsky LNG, and this mile-
EU imports, on the other hand, were up stone is unlikely to be reached until Arctic Cas-
less than 1% y/y at 21mn tonnes. Growth was cade has been proved to work.
undermined not only by COVID-19 restric- “Engineering work is proceeding forward
tions and economic stagnation but also by large on the Obsky LNG as we previously advised but
inventories. there is really nothing new to report on this pro-
“Europe remains the most liquid market with ject at this time,” Gyetvay said.
its ability to consume additional LNG volumes, In contrast, the CFO hailed strong progress at
but high inventory levels will constrain natural the 19.8mn tpy Arctic LNG-2 project, on which
gas prices through the third quarter and up to Novatek, Total and Chinese and Japanese part-
the start of the traditional winter season,” Gyet- ners took an FID last year. Despite COVID-19
vay said. disruptions, the project is 21% complete and still
Underground gas storage utilisation was at on track for first gas in 2023.
a record high of 83% in mid-July, versus 77% a Novatek has signed some heads of agree-
year earlier. ments (HoAs) on the sale of its share of the ter-
Gas prices at the world’s key hubs are now at minal’s gas. Its project partners Total, China’s
less than $2.00 per mmBtu. Forward curves are CNPC and CNOOC, and Japan’s Mitsui and
encouraging and a rebound is predicted in the JOGMEC, committed to taking their shares of
fourth quarter, Gyetvay said, but this recovery its supply before an FID was taken.
will be limited by US LNG supplies resuming. At the same time, Novatek is hesitant to final-
ise contracts before market conditions improve.
Operations “At these low natural gas prices, which are
On the operations front, Yamal LNG was work- near historical lows, this is making the contract
ing at 109% of its nameplate capacity in the sec- process very, very complicated,” Gyetvay said.
ond quarter, according to Gyetvay. He added “Sellers are not willing to fix current low prices.
that no customers had declared forces majeures They’re not willing to commit to long-term con-
during the period. tracts because we all know that the gas prices will
The completion of Yamal LNG’s fourth train eventually increase.” ™

Week 31 05•August•2020 www. NEWSBASE .com P5