Page 5 - FSUOGM Week 44

FSUOGM COMMENTARY FSUOGM

Novatek's Yamal LNG
project, while it was still
under construction.

these new LNG volumes, as supply and demand to serve Arctic LNG-2, along with a further six
is never matched perfectly.” from South Korea’s Daewoo Shipbuilding &
There have so far been no final investment Marine Engineering (DSME). Russian author-
decisions (FIDs) on new LNG production capac- ities had originally wanted Novatek to order all
ity this year. This could make 2020 the first year the vessels domestically, but the company argued
in over two decades where there have been no that doing so could have held up progress at Arc-
project approvals. But this lack of FIDs should tic LNG-2.
help tighten supply post-2025, Gyetvay said. Construction on the project was 27% com-
plete at the end of September, up from 21% at
Financials the end of June, Gyetvay said, with the first train
Novatek has taken a significant hit to revenues roughly 39% complete. Novatek does not expect
this year, but it has fared better than many inter- any delays in the delivery of LNG topside mod-
national rivals thanks to its low costs and stable ules, as around 7,000 workers have been mobi-
revenues from domestic sales. lised at module construction sites in China.
The company saw its revenues drop 23.6% “These yards are producing at full capacity
year on year in the 9M of January to Septem- today,” Gyetvay said, adding that the first mod-
ber to RUB484.4bn ($6.1bn), but expenses ule for the first concrete gravity-based structure
also fell almost 18%, to RUB388.3bn. Novatek’s (GBS) is expected to arrive at Novatek’s yard in
EBITDA was down 21.4% at RUB265.8bn in the Murmansk in September 2021. First gas is still
nine-month period, but was only 10.2% lower on track to occur in 2023 as planned, he said.
in the third quarter at RUB93.9bn. It blamed the “We also see no delays in launching the next
weaker numbers on low prices, ruble devalua- trains on GBS 2 and GBS 3 in 2024 and 2026,
tion and other factors outside its control. he said.
The company’s gas production was up 1.5%
at 56.71bn cubic metres in January to Septem- Smaller projects
ber and up 4.5% in the third quarter. Gas sales Novatek had also hoped to commission a
in Russia were a source of support, with both fourth 0.9mn tpy train at Yamal LNG by the end
volumes and prices holding firm. Novatek sells of last year, but its launch has been repeatedly
its gas to industrial customers in Russia at partly pushed back. Despite its small size, the train is a
regulated tariffs. key project, as it will employ Novatek’s proprie-
Novatek expects to outperform the Russian tary Arctic Cascade liquefaction technology for
gas industry and deliver a 2% growth in gas out- the first time.
put this year, while Russia as a whole is due to see “We plan to complete the construction works
a 9-10% decline. Despite some LNG spot cargo at Train 4 at Yamal LNG by the end of the year
cancellations in the second quarter, Novatek’s but will start the facility’s commissioning over
flagship 16.5mn tonne per year (tpy) Yamal the upcoming weeks,” Gyetvay said.
LNG operated at 113% capacity in the first nine If Arctic Cascade performs as expected,
months of the year, according to Gyetvay. Novatek will use the technology at another, 5mn
tpy, export plant, known as Obsky LNG. The
Export expansion company plans to develop Obsky LNG without
Novatek's main focus is on its next major export foreign partners, but deferred taking an FID
venture Arctic LNG-2, due on stream in 2023. from 2020 until 2021, in light of market condi-
That project would boast an even larger capacity tions and delays at Yamal LNG’s fourth train.
of 19.8mn tpy, with 80% of this supply heading Pre-front-end engineering and design
to Asia-Pacific markets, according to Gyetvay. (FEED) work on Obsky LNG is still ongoing,
The company recently ordered some 15 LNG and Gyetvay said the company was considering
carriers (LNGCs) from Russia’s Zvezda shipyard some changes to the project's parameters. ™

Week 44 04•November•2020 www. NEWSBASE .com P5