Page 5 - FSUOGM Week 29 2021

FSUOGM COMMENTARY FSUOGM

Novatek's Yamal LNG
facility.

government has not yet developed the necessary Operations
legislation. Officials are working on the matter, Novatek reported a recovery in its natu-
however, and Novatek is assisting in the process. ral gas and condensate production in the
first half of this year, reflecting improving
Natural edge economic conditions that have supported
Novatek boasts among the lowest GHG emis- increased gas use.
sions of any Russian oil and gas producer, and The company reported that its gas output,
this was reflected in the fact it became the first including that from the Yamal LNG joint ven-
Russian firm to get an A rating on ESG by US ture, rose by nearly 7% year on year to over
financial firm MSCI in December last year. 40.1bn cubic metres between January and June.
This partly reflects some natural benefits that Condensate extraction climbed 4% to around
Novatek enjoys. First, it primarily produces gas 254,000 bpd. The growth accelerated in the sec-
rather than oil, which is dirtier. Secondly, its ond quarter, with production of gas and conden-
assets are all concentrated in a handful of clusters sate up 8% and 7% y/y respectively.
in north-west Siberia, reducing emissions from Sales to the domestic gas market were up
transport and making it easier for the company 7% at nearly 35 bcm. Domestic sales provided
to manage its associated gas. Thirdly, its assets Novatek with some financial stability last year as
are mostly modern, whereas rivals Gazprom, the coronavirus (COVID-19) pandemic took its
Rosneft and Lukoil inherited a lot of older Soviet toll on the international LNG market.
infrastructure that is less efficient and releases In other operational news, Novatek issued a
more emissions. tender disclosure notice last week for the drill-
The question is whether Novatek can achieve ing of an exploration well this upcoming win-
its climate ambitious while also pursuing a ter targeting the deep Achimov formations at
rapid growth strategy. The company is looking the Gydansky block on the Gydan Peninsula.
to boost its liquefaction capacity in the Russian The goal of the well is to assess flowrates from
Arctic to 70mn tonnes per year (tpy) by the end thin and high-pressure Achimov formations at
of the decade, with a raft of new projects. depths below 3,200 metres, both before and after
Novatek’s emissions targets are based on they are fracked, Novatek said.
intensity rather than absolute volumes, which The Achimov formation is found throughout
means it still can in theory deliver on them while much of the Western Siberian oil and gas area
expanding its production. But beyond its own at depths of between 2,500 and 3,500 metres. It
Scope 1 and 2 emissions, Novatek is also keen to is considered one of Russia’s most challenging
demonstrate the benefits that its gas has in limit- horizons, characterised by thin sandstone reser-
ing the use of dirtier fuels such as coal. voirs that vary greatly in thickness and quality,
Particularly in Asia, gas can displace coal as and are sometimes subject to high temperatures
a key source of baseload power and help sup- and high pressure. As such, its oil and gas is clas-
port systems that are integrating more renewa- sified as hard to recover. However, a number of
bles, the company explained in its sustainability Russian oil and gas producers are counting on
report, also published last week. It estimates that Achimov to deliver growth.
62mn tonnes of LNG could replace up to 152mn Novatek secured a 27-year exploration
tonnes of bituminous coal, thereby preventing licence for the Gydansky block in 2017 and
the emission of more than 160mn tonnes of CO2 wants to find more gas in the area to underpin
into the atmosphere. new liquefaction projects. ™

Week 29 21•July•2021 www. NEWSBASE .com P5