Page 6 - FSUOGM Week 36 2019

FSUOGM COMMENTARY FSUOGM
Green light for Arctic LNG 2
Russia’s Novatek has greenlit the development of its second LNG export project in the Arctic, as it sets its sights on becoming one of the world’s leading LNG producers.
RUSSIA
WHAT:
Novatek and its partners have taken an FID on Arctic LNG-2.
WHY:
Novatek had already comimited to the project some time ago.
WHAT NEXT:
Arctic LNG-2 will primarily target Asian markets, helping Russia emerge as a leading global LNG player.
RUSSIA’S Novatek has greenlit the development of its second LNG export project in the Arctic, as it sets its sights on becoming one of the world’s leading LNG producers.
A final investment decision (FID) on Arc- tic LNG-2, a proposed 19.8mn tonne per year (tpy) liquefaction plant, was taken by Novatek and its partners at the Eastern Economic Forum in Vladivostok on September 5. The $21.3bn project’s official approval is seen largely as a for- mality, as Novatek had already committed to its development some time ago.
Novatek finalised Arctic LNG-2’s shareholder structure back in July, after selling a 10% com- bined stake to Japan’s Mitsui and JOGMEC. Other investors include China’s CNPC and CNOOC and France’s Total, each with a 10% interest. The Russian firm has already begun production drilling and infrastructure devel- opment, and more than 90% long-lead items have already been ordered to ensure its timely start-up in 2023. The terminal is slated to reach its full capacity sometime after 2026, following the launch of its second and third trains.
Novatek’s confidence in Arctic LNG-2 draws from the successful implementation of its Arctic
LNG venture, the 16.5mn tpy Yamal LNG ter- minal. Novatek, Total and Chinese partners successfully managed to implement the $27bn project on time and on budget in late 2017, overcoming low oil prices, sanctions and other obstacles.
Despite having a larger capacity, Arctic LNG- 2’s projected capex is only $21.3bn, as some of the necessary infrastructure has already been built for Yamal LNG. Moving forward, Novatek plans to take an FID on another export terminal, Obsk LNG, by mid-2020. This plant will have a smaller capacity of 5mn tpy, largely because it will employ Russian rather than Western lique- faction technology. Novatek’s longer-term goal is to have 70mn tpy of production capacity up and running in the Arctic by 2030.
The company is also aiming to expand fur- ther downstream in the global gas market, to control more of the value chain and ensure sales. It signed preliminary deals at the Vladivostok forum to work with Indian and Japanese gas importers to market LNG and gas to end-cus- tomers in Asia, promoting its use in bunkering, motor transport and power generation.
On a national level, Moscow wants to produce
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w w w . N E W S B A S E . c o m Week 36 11•September•2019