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FSUOGM ENERGY TRANSITION FSUOGM

Novatek might sell a stake in blue hydrogen

project to Japan’s Mitsui

RUSSIA RUSSIAN LNG producer Novatek might sell a advantage of the momentum on the ‘green’
stake in its “blue hydrogen” Obsky GCP project market that is picking up. By combining
Novatek has converted to Japan’s Mitsui, Kommersant reported on June ammonia, hydrogen, and apparently metha-
its Obsk LNG project 24. nol production, they can show Western cor-
to produce hydrogen, Mitsui would remain the minority share- porates they’re more competent than their
methanol and holder and might also be a major buyer of ‘blue’ state-owned enterprises (SOEs) competitors
ammonia. ammonia produced by the project. Blue hydro- in Russia, have a great relationship with the
gen is hydrogen made by sheering off hydrogen state, and want to build ‘green’ assets.
from hydrocarbons and capturing the result- The current cost of CO2 emission in Europe
ing CO2 waste gas. The project is at the port of has soared this year and is currently at $60 per
Sabetta on the Yamal peninsula and might be tonne, so any premium is likely to be around
launched in 2026. $100/t, which can be added to the current unu-
The project envisages the construction of sually high price of ammonia of $530/t.
2.4mn tonnes of capacity of conventional steam Accounting for carbon capture (to make
methane reforming, and ammonia synthesis ammonia ‘blue’), the project might cost $1,100-
with capacity of 2.2mn tonnes. That will also 1,400 per ton in terms of capex, or $2.4-3.1bn
capture the CO2 emitted in the process of steam for the entire plant, according to VTB Capital
reforming and power generation, which would (VTBC) estimates.
allow the company to certify the ammonia as “In our view, the plant is to be subject to the
“blue” and get the corresponding premium subsidies that are currently being discussed by
which is starting to arise on the international the government. We expect the project to have
markets. NPV of $1.2-1.5bn. Overall, we see the news as
What’s most important here is that the supportive for Novatek,” VTBC said.
ammonia plant is intended to make use of CO2 “The fundamental ESG advantage of gas
from the methane released during the pro- names, coupled with company-specific drivers
duction of “blue” hydrogen, a new angle to the and potential geopolitical shifts, will, we expect,
Arctic-2 LNG project Novatek is leading with provide the catalysts for a further appreciation
TotalEnergies (and in which a Japanese consor- in Russian gas stocks relative to oils. Overall, we
tium including Mitsui owns 10%). believe that Novatek might have strong advan-
These projects aren’t necessarily sanc- tages in terms of the cost of energy, water and
tioned or else as closely scrutinised by OFAC infrastructure, to compete with international
and European authorities and they allow projects in carbon capture, utilisation and
Novatek in particular to get a step ahead of sequestration (CCUS) and ‘blue’ hydrogen/
Rosneft, Gazprom and Lukoil in creating val- ammonia/other fossil derivatives with a cleaned
ue-added synergies from its output that take CO2 footprint,” VTBC added. ™

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