Page 12 - GLNG Week 03 2021

GLNG COMMENTARY GLNG

Ltd (OVL). The Russian company’s CEO, Igor What next?
Sechin, told a conference in September 2019 While the pandemic and the slump in interna-
that the consortium members had “made a deci- tional gas prices have capped Russia’s LNG ambi-
sion” to build the plant. But a formal FID is still tions for the time being, many other producers
pending. Sechin said before the pandemic that have also delayed adding extra supply in light of
the group was targeting first gas in 2027, but the the crisis. This means Russia is less likely to lose
coronavirus (COVID-19) crisis has altered the out on future market share.
timeframe, Vostok said. Only one FID was taken on new liquefaction
Sechin also said earlier this year that its capacity in 2020, in stark contrast to the record
Vostok Oil project in the Arctic could one day level of approvals in the previous year, when
deliver some 50mn tpy of LNG to market. But some 70mn tpy of extra supply was cleared for
this is only an aspiration, as further appraisal development. US operator Sempra Energy took
work is needed to determine Vostok Oil’s pro- an FID on the first phase of its Energia Costa
duction capacity. Azul (ECA) LNG terminal on Mexico’s Pacific
Rosneft has been trying unsuccessfully coast last November.
to advance LNG projects for many years. A The exception is Qatar, which is pushing
previous plan to liquefy gas in the northern ahead with a massive expansion project at its
Timan-Pechora region, known as Pechora LNG, North Field without having taken a formal FID,
was axed in 2018, as Rosneft lacked the gas sup- undeterred by market challenges. Development
plies to underpin it. drilling began in March last year at the North
Gazprom has had similar difficulty in LNG, Field East (NFE) project, which will ramp up
and the 11mn tpy Sakhalin LNG plant on Sakha- the country’s liquefaction capacity from 77mn
lin Island, launched in 2009, remains its only to 110mn tpy. First gas is expected by 2025. The
export terminal in operation. The Russian com- North Field South (NFS) project will raise out-
pany did not join the project until 2006, at which put further to 126mn tpy by the late 2020s.
point development was already well underway, Russia’s low costs give it an edge in the compe- Rosneft has
replacing Royal Dutch Shell as operator. tition for LNG market share. Novatek’s Gyetvay
There have been on-again, off-again plans to said in December that the company was able to been trying
add a third train at Sakhalin LNG for years, to deliver LNG into north-east Asian markets for unsuccessfully
boost its capacity by 50%. But there are concerns “a little over” $3 per mmBtu. This sum, he said,
that Gazprom lacks the necessary gas supply. comprises a $0.07 cost of feedgas, $0.43 in liq- to advance LNG
One of the company’s main focuses now is uefaction costs, and between $2.0 and $2.5 in
the construction of an LNG production and gas shipping costs. projects for many
processing complex at the Baltic port of Ust- The Russian LNG sector’s vulnerability lies
Luga. It originally wanted to build an LNG plant in its heavy reliance on foreign equipment and years.
only, in partnership with Shell, but it decided to technology, however. Vostok surveyed some
build processing facilities as well last year. 200 respondents from engineering and design
The Anglo-Dutch major promptly quit, over companies, operators of small and large LNG
the change in the project’s scope and Gazprom productions, technical specialists, contractors,
bringing on board privately owned Rusgazdo- suppliers and producers of equipment. Some
bycha as a partner. Rusgazdobycha’s founder 21% pointed to technical and technologies chal-
Arkady Rotenberg, a close ally of Russian Presi- lenges – namely the lack of domestic equipment
dent Vladimir Putin, has been blacklisted under manufacturing and technology.
the US sanctions regime. Russia has been striving to localise equipment
In a report released in Q3 2020, Gazprom and technology in recent years, but the results
said the Baltic plant’s first train would start up from this poll suggest there is still a lot more
in 2024, followed by its second in 2025. work to be done.™

P12 www. NEWSBASE .com Week 03 22•January•2021