Page 5 - FSUOGM Week 03 2021

FSUOGM COMMENTARY FSUOGM

Japan’s Sodeco and India’s ONGC Videsh Ltd What next?
(OVL). The Russian company’s CEO, Igor While the pandemic and the slump in interna-
Sechin, told a conference in September 2019 tional gas prices have capped Russia’s LNG ambi-
that the consortium members had “made a deci- tions for the time being, many other producers
sion” to build the plant. But a formal FID is still have also delayed adding extra supply in light of
pending. Sechin said before the pandemic that the crisis. This means Russia is less likely to lose
the group was targeting first gas in 2027, but the out on future market share.
coronavirus (COVID-19) crisis has altered the Only one FID was taken on new liquefaction
timeframe, Vostok said. capacity in 2020, in stark contrast to the record
Sechin also said earlier this year that its level of approvals in the previous year, when
Vostok Oil project in the Arctic could one day some 70mn tpy of extra supply was cleared for
deliver some 50mn tpy of LNG to market. But development. US operator Sempra Energy took
this is only an aspiration, as further appraisal an FID on the first phase of its Energia Costa
work is needed to determine Vostok Oil's pro- Azul (ECA) LNG terminal on Mexico’s Pacific
duction capacity. coast last November.
Rosneft has been trying unsuccessfully The exception is Qatar, which is pushing
to advance LNG projects for many years. A ahead with a massive expansion project at its
previous plan to liquefy gas in the northern North Field without having taken a formal
Timan-Pechora region, known as Pechora LNG, FID, undeterred by market challenges. Devel-
was axed in 2018, as Rosneft lacked the gas sup- opment drilling began in March last year at
plies to underpin it. the North Field East (NFE) project, which will
Gazprom has had similar difficulty in LNG, ramp up the country’s liquefaction capacity
and the 11mn tpy Sakhalin LNG plant on Sakha- from 77mn to 110mn tpy. First gas is expected
lin Island, launched in 2009, remains its only by 2025. The North Field South (NFS) project
export terminal in operation. The Russian com- will raise output further to 126mn tpy by the
pany did not join the project until 2006, at which late 2020s.
point development was already well underway, Russia’s low costs give it an edge in the com-
replacing Royal Dutch Shell as operator. petition for LNG market share. Novatek’s Gyet-
There have been on-again, off-again plans to vay said in December that the company was able
add a third train at Sakhalin LNG for years, to to deliver LNG into north-east Asian markets
boost its capacity by 50%. But there are concerns for “a little over” $3 per mmBtu. This sum, he
that Gazprom lacks the necessary gas supply. said, comprises a $0.07 cost of feedgas, $0.43 in
One of the company’s main focuses now is the liquefaction costs, and between $2.0 and $2.5 in
construction of an LNG production and gas pro- shipping costs.
cessing complex at the Baltic port of Ust-Luga. The Russian LNG sector’s vulnerability lies
It originally wanted to build an LNG plant only, in its heavy reliance on foreign equipment and
in partnership with Shell, but it decided to build technology, however. Vostok surveyed some
processing facilities as well last year. 200 respondents from engineering and design
The Anglo-Dutch major promptly quit, over companies, operators of small and large LNG
the change in the project’s scope and Gazprom productions, technical specialists, contractors,
bringing on board privately owned Rusgazdoby- suppliers and producers of equipment. Some
cha as a partner. Rusgazdobycha’s founder Ark- 21% pointed to technical and technologies chal-
ady Rotenberg, a close ally of Russian President lenges – namely the lack of domestic equipment
Vladimir Putin, has been blacklisted under the manufacturing and technology.
US sanctions regime. Russia has been striving to localise equip-
In a report released in Q3 2020, Gazprom ment and technology in recent years, but the
said the Baltic plant’s first train would start up in results from this poll suggest there is still a lot
2024, followed by its second in 2025. more work to be done. ™

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