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Three Russian mega-projects

stall on sanctions woes

PROJECTS FEARS of being hit by secondary western sanc- intended to monetize gas reserves on the Sakha-
tions and trouble raising financing are among lin shelf as part of the Sakhalin-1 consortium.
the many problems facing a slew of Russian “The project that the Americans announced –
mega-projects that are increasingly being sus- Exxon – in the port of De-Kastri with a pipe from
pended or stopped completely. Sakhalin, it is frozen. Why this is being done – it
Among the biggest victims is the $10bn Amur amazes me! This is shooting yourself in the foot.
Gas Chemical Complex, a giant petrochemical There is gas, there is a coast, labour resources and
plant being jointly built by Russia’s Sibur and investments there is, but they are freezing the
China’s Sinopec. The deal was signed in Decem- project for political reasons,” Mikhail Degtyarev,
ber 2020 but the duo announced in April that the region’s governor, said in a local interview.
they are “reconsidering” the implementation osneft originally estimated that the plant
of the plant that is already over a third finished would create 5,000 jobs in the construction
(37.8%) and was due to open in 2024. The prob- phase, 700 permanent positions when it was fin-
lem is the partners are no longer sure it can be ished and altogether generate RUB5 trillion for
completed after the imports technical parts have the local economy.
been sanctioned. Meanwhile, Sakhalin is also expected to suf-
The project is 40% owned by Sinopec and fer, as when both ExxonMobil and Shell leave
worth $10bn. It is the largest investment project gas projects there their own technology will be
in the otherwise fairly depressed region and if it difficult to replace.
fails to go ahead that will harm the local econ- The Khabarovsk Territory has other big
omy. The plant itself is supposed to supply pol- investment projects going on, e.g. in the field of
ymers to the Chinese market, and become the logistics: if Russian coal exports pivot to China,
largest factory of basic polymers in the world, the government will need to ramp up the mod-
reports Andras Toth-Czifra, a Russia researcher. ernisation of railways and ports.
“While Sinopec has not abandoned the pro- Another megaproject that will at least require
ject, it has “paused” participation, which sug- adjustments is the Northern Latitudinal Railway,
gests that as long as there is a risk of secondary a project of the state-owned Russian Railways
sanctions, it won’t be finished,” says Toth-Czifra. (RZhD) and the state-owned Gazprom, which
“This will not only impact jobs in the region but would connect the Yamal Peninsula with North-
also Gazprom’s local plant, to which the new western Russia through the Urals, and which was
complex is connected.” expected to open in 2023.
Another frozen megaproject is Far East LNG, he project is part-funded by the RZhD, the
a $4.2bn project by the state-owned oil major National Welfare Fund and the Yamal-Nenets
Rosneft and US oil company ExxonMobil. This AO’s budget and concessions. But in March
project was also suspended in April after Exxon it turned out that there’s a financing gap of
withdrew from Russia. RUB250bn, even after reallocating RUB50bn of
The project is connected to gas extraction in infrastructure loans, reports Toth-Czifra.
Sakhalin, but the plant itself was planned to be The railway is considered a key part in the
located in the Khabarovsk Territory and due to development of the energy industry of Eastern
go online in 2028 Siberia, the Arctic (including the Northern Sea
Exxon Neftegaz Ltd (ENL, a subsidiary of Route), to unburden the Trans Siberian Rail-
ExxonMobil, operator of the Sakhalin-1 project) way (an essential logistics challenge) and ensure
launched a tender campaign in February to select more reliable delivery of goods to the regions.
contractors for the Far East LNG project. The “But with technology exports limited and
company announced the search for contractors the future of projects (e.g. Novatek’s Yamal LNG
to assess the quality of building materials, as well project) hanging in the balance, it is unclear if
as the search for manufacturers of reinforced the development of the Northern Sea Route
concrete products. will even go ahead as planned – and that will
The construction of an LNG plant with a have repercussions in northwest Russia too,”
capacity of 6.2mn tonnes per year (tpy) was Toth-Czifra said.™

P14 www. NEWSBASE .com Week 16 22•April•2022