Page 4 - FSUOGM Week 03 2021

FSUOGM COMMENTARY FSUOGM

Russian LNG output could reach

100mn tpy by 2035: Vostok Capital

Russia is set to supply 20% of the global LNG market by 2035, despite

pandemic-related setbacks

RUSSIA RUSSIAN LNG production is on track to reach important, as it will showcase Novatek’s proprie-
as much as 100mn tonnes per year (tpy) by 2035, tary Arctic Cascade liquefaction technology for
WHAT: according to research by Moscow-based Vostok the first time. Russia is on a drive to localise oil
Russia's three biggest gas Capital, despite some pandemic-related project and gas equipment manufacturing and technol-
producers are advancing delays. This forecast is closer to the bottom end ogy, in order to overcome reliance on imports.
a raft of new LNG export of the lofty prediction in Russia’s latest energy Novatek has been mute on the reasons for the
projects. strategy published in April 2019, which saw sup- train’s delay, although the Moscow-based Kom-
ply ranging between 80mn and 140mn tpy in 15 mersant newspaper reported last year that there
WHY: years’ time. had been an error in the design of its pipelines.
While they have delayed Emboldened by the success of its Yamal LNG The pandemic and resulting slump in inter-
some of these projects terminal launched in 2017, Novatek is develop- national gas prices were likely contributing fac-
in light of the pandemic ing a raft of new export projects in the Russian tors to the train’s postponed commissioning.
and low gas prices, many Arctic. With this extra supply, Russia is set to Its volumes are destined for the spot market,
other producers have control up to 20% of the global LNG market by Novatek CFO Mark Gyetvay said in December.
taken similar steps. 2035, Vostok said. If Arctic Cascade performs as expected,
Russian output amounted to 27.6mn tonnes Novatek will use the technology at another,
WHAT NEXT: from January to November, according to state 5mn tpy export plant known as Obsky LNG.
Russia's low costs statistics, up 3.7% year on year. Most of this sup- The company intends to develop Obsky LNG
give it an edge in the ply comes from Yamal LNG, on the Arctic Yamal without foreign partners, but deferred taking an
competition for market Peninsula, and the Sakhalin LNG terminal oper- FID from 2020 until 2021 because of market vol-
share, but the country is ated by Gazprom in the Russian Far East. atility. Gyetvay said in November that pre-front-
vulnerable because of Gazprom and state oil company Rosneft are end engineering and design (FEED) work on the
its heavy dependence on developing their own projects elsewhere, but project was still ongoing, noting that Novatek
foreign equipment and the Russian Arctic is where the country’s main was considering some changes to its parameters.
technology. LNG potential lies. Vostok expects Russian Arc- Novatek is also working on a third Arctic
tic LNG supply to reach 43mn tpy by 2024 and export project Arctic LNG-1, which will be
64mn tpy by 2030. located in the Yamalo-Nenets region of Western
This suggests that Novatek’s own target of Siberia. Its anticipated production capacity is
70mn tpy of supply within a decade is too ambi- 20mn tpy.
tious. The company took a final investment Russian engineering firm InjGeo won a
decision (FID) on its second major LNG pro- tender for engineering and geological explora-
ject Arctic LNG-2 in September 2019. It said as tion for the project in December last year. The
recently as November that the terminal was on exploration phase is due to run until May 2021.
track for first gas in 2023, despite the pandemic. Novatek also wants to build the similarly-sized
At full capacity it will produce 19.5mn tpy of Arctic LNG-3 terminal, but that project is still
super-cooled gas, surpassing Yamal LNG’s 17mn on the drawing board.
tpy output.
Gazprom, Rosneft ventures
Novatek delays While Novatek is the frontrunner in Russian
While Arctic LNG-2 may remain on track, LNG, Rosneft and Gazprom are crafting their
Novatek’s other upcoming projects have own plans.
incurred delays. A fourth, 0.9mn tpy train at Rosneft wants to develop on 6.2mn tpy plant
Yamal LNG had been due to start up in late 2019 in the Far Eastern region of Khabarovsk, with
but its launch has been repeatedly pushed back. capital expenditure estimated to be $9.8bn. It
Novatek said in December that the facility would will be supplied by fields controlled by the Ros-
be up and running in Q1 2021. neft-led Sakhalin-1 consortium.
Despite its small size, the train is nevertheless Rosneft is joined at Sakhalin-1 by ExxonMobil,

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