Page 5 - FSUOGM Week 37 2021

FSUOGM COMMENTARY FSUOGM

project deadlines. But Nipigaz said the project’s Gazprom is not the first Russian company to
developers had not agreed on a financing model, announce its own liquefaction technology. First
while also pointing to “discrepancies” in the pro- was Novatek, which developed its own proprie-
ject’s risk assessment, and how risks should be tary Arctic Cascade technology that takes advan-
shared between customer and contractor. tage of low ambient temperatures in the Russian
In light of the new EPC award, however, ana- Arctic to reduce costs.
lysts are now confident that the Ust-Luga com- It remains to be seen how effective Arctic
plex will be built. Cascade is, however. Novatek is trialling the
“This project is actually going to happen,” technology at a fourth mini-train undergoing
analysts at BCS Global Markets said in a research commissioning at the Yamal LNG plant. Its
note on September 10. “The concept of an LNG launch has been delayed repeatedly.
plant at Ust-Luga has been in discussion for at
least 15 years, and as such the concept has been Catching up in LNG
treated with some scepticism of late. However, it Gazprom is already involved in LNG produc-
now appears set to become reality.” tion on Sakhalin Island in the Russian Far East.
The Ust-Luga project is part of a broader The Sakhalin LNG plant produces more than
development drive by Gazprom. The company 10mn tpy of LNG, most of which is sold in Asian
is also working with Rusgazdobycha on develop- markets.
ing several large wet gas fields in Western Siberia While Gazprom is the facility’s main share-
that will supply the gas for the plant. Develop- holder, it was its partner Shell that carried the
ment drilling began at the largest of these fields, project through key stages of development. Gaz-
Semakovskoye, in May last year. The plant will prom only joined the project in 2007, two years
meanwhile provide substantial gas volumes for before its launch.
Gazprom’s Nord Stream 2 pipeline, where con- Gazprom is yet to lead a successful LNG pro-
struction was announced as complete on Sep- ject in earnest. Analysts have attributed this to
tember 10. a lack of focus, as most of Gazprom’s attention
“With European gas prices setting new record has been on expanding pipeline gas exports, as
highs on an almost [daily] basis, we think inves- well as weaker project management ability. The
tors are likely becoming more positively inclined company has built up a reputation for cost over-
towards this project,” BCS GM analyst Ronald runs, as were seen at its Power of Siberia pipeline
Smith said. project to China.
In contrast, Novatek has moved ahead dra-
Tech progress matically quickly with its LNG projects in Rus-
In its statement, Gazprom said the liquefaction sia’s far north. It launched its first liquefaction
plant would use a technology patented in Rus- project, the 17mn tpy Yamal LNG plant, in
sia, noting that itself and Linde were the patent December 2017 and had taken a final investment
holders. decision (FID) on its second, the 20mn tpy Arc-
Gazprom and other Russian oil and gas com- tic LNG-2, less than two years later.
panies have taken steps in recent years to reduce Novatek has several more LNG schemes in
their reliance on foreign equipment and technol- the pipeline, and is targeting up to 70mn tpy of
ogy, as part of a national localisation drive that annual supply by the end of this decade.
began after relations with the West collapsed in Gazprom expanding in the LNG arena is
2014. But progress has been slow, with the share likely good news for the company’s business
of local products in new projects generally falling model, which is heavily reliant on pipeline gas
below quotas. A key focus has been on localising sales to Europe. That heavy reliance is gener-
technology in the LNG field, which would help ating Gazprom record profits at present, on
shield the critical sector from a potential tight- the back of the spike in European gas prices in
ening of international sanction regimes in the recent months. But it also leaves the company
future, while also providing a boost to Russian exposed at times when the global gas market
manufacturing. is bearish. ™

Week 37 15•September•2021 www. NEWSBASE .com P5