Page 155 - RusRPTMay21

the company said in a its corporate magazine on Monday. “In 2021, Gazprom plans to do 6,647 square kilometers of 3D seismic exploration works, to drill 74,300 linear meters of rock, to complete construction of 31 exploratory and test wells on the territory of Russian Federation," the company said. The company expects the Kara Sea shelf and West Siberia to contribute most to the reserve increase.
Gazprom cuts LNG costs 50% with move to Linde technology.
Gazprom, long known for increasing CapEx budgets for large projects, may be going against character in cutting the estimates for its Baltic LNG project by half with a move to a foreign contractor.
Switch to Linde will cut the cost of the Baltic LNG project by half to $5bn, reports Vedomosti this morning.
A significant savings. Announced earlier this week, the move from a Russian contractor to Germany’s Linde – which provides one of the more successful LNG technologies on the market – to save EUR5bn or 50% of the project cost is significant. In reality, the initial estimate of EUR10bn was not too unreasonable at c$920/ton for the plant’s 13mtpa of designed LNG capacity, especially considering that the Gas Processing Plant (GPP) will also include significant liquids production (ethane especially). At c$460/ton, Baltic LNG would be one of the more efficiently-built LNG plants globally.
Cost cuts run counter to Gazprom’s track record: We think this is good news for GAZP, as we were already encountering negative feedback from investors about Gazprom’s next ‘big project’ that would absorb any possible amount of free cash flow generated by the business. Our opinion has been that the company’s overhaul of its dividend policy in 2019 should result in both CapEx and operating cost savings over time as management learned to live within a tighter budget. This news lends credence to that opinion.
Construction of Gazprom’s Baltic LNG now slated to start this month, according to Neft i Kapital. Things are now moving fast for the project. After being on and off the drawing board for at least a decade, Baltic LNG is now moving forward quickly. This news follows last week’s news that Gazprom and Rusgazdobycha – its partner in the project – cut the contractor price for the project in half, from c$10bn to c$5bn, by switching from a Russian provider to Germany’s Linde. First production is slated for as early as late 2023. Our view of Baltic LNG – Neutral for now, with a small positive bias. While investors have been trained to be skeptical of high-budget Gazprom projects, this one seems to a reasonable use of the company’s capital, designed to extract maximum value from new streams of production (increasing output of very
155 RUSSIA Country Report May 2021 www.intellinews.com