Page 7 - GLNG Week 29 2021

GLNG COMMENTARY GLNG

suitable locations for CCS in Russia’s far north, tonnes of CO2 into the atmosphere.
but impeding progress is the fact that Russia’s
government has not yet developed the necessary Operations
legislation. Officials are working on the matter, Novatek reported a recovery in its natural gas
however, and Novatek is assisting in the process. and condensate production in the first half of
this year, reflecting improving economic condi-
Natural edge tions that have supported increased gas use.
Novatek boasts among the lowest GHG emis- The company reported that its gas output,
sions of any Russian oil and gas producer, and including that from the Yamal LNG joint ven-
this was reflected in the fact it became the first ture, rose by nearly 7% year on year to over
Russian firm to get an A rating on ESG by US 40.1bn cubic metres between January and June.
financial firm MSCI in December last year. Condensate extraction climbed 4% to around
This partly reflects some natural benefits that 254,000 bpd. The growth accelerated in the sec-
Novatek enjoys. First, it primarily produces gas ond quarter, with production of gas and conden-
rather than oil, which is dirtier. Secondly, its sate up 8% and 7% y/y respectively.
assets are all concentrated in a handful of clusters Sales to the domestic gas market were up 7% at
in north-west Siberia, reducing emissions from nearly 35 bcm. Domestic sales provided Novatek
transport and making it easier for the company with some financial stability last year as the coro-
to manage its associated gas. Thirdly, its assets navirus (COVID-19) pandemic took its toll on
are mostly modern, whereas rivals Gazprom, the international LNG market.
Rosneft and Lukoil inherited a lot of older Soviet In other operational news, Novatek issued a
infrastructure that is less efficient and releases tender disclosure notice last week for the drill-
more emissions. ing of an exploration well this upcoming win- The question is
The question is whether Novatek can achieve ter targeting the deep Achimov formations at
its climate ambitious while also pursuing a the Gydansky block on the Gydan Peninsula. whether Novatek
rapid growth strategy. The company is looking The goal of the well is to assess flowrates from can achieve its
to boost its liquefaction capacity in the Russian thin and high-pressure Achimov formations at
Arctic to 70mn tonnes per year (tpy) by the end depths below 3,200 metres, both before and after climate ambitious
of the decade, with a raft of new projects. they are fracked, Novatek said.
Novatek’s emissions targets are based on The Achimov formation is found throughout while also
intensity rather than absolute volumes, which much of the Western Siberian oil and gas area
means it still can in theory deliver on them while at depths of between 2,500 and 3,500 metres. It pursuing a rapid
expanding its production. But beyond its own is considered one of Russia’s most challenging growth strategy.
Scope 1 and 2 emissions, Novatek is also keen to horizons, characterised by thin sandstone reser-
demonstrate the benefits that its gas has in limit- voirs that vary greatly in thickness and quality,
ing the use of dirtier fuels such as coal. and are sometimes subject to high temperatures
Particularly in Asia, gas can displace coal as a and high pressure. As such, its oil and gas is clas-
key source of baseload power and help support sified as hard to recover. However, a number of
systems that are integrating more renewables, Russian oil and gas producers are counting on
the company explained in its sustainability Achimov to deliver growth.
report, also published last week. It estimates Novatek secured a 27-year exploration licence
that 62mn tonnes of LNG could replace up for the Gydansky block in 2017 and wants to find
to 152mn tonnes of bituminous coal, thereby more gas in the area to underpin new liquefac-
preventing the emission of more than 160mn tion projects.™

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