Page 115 - RusRPTFeb24

modest 430,000 tonnes, according to Kpler data.
Lack of access to technology is delaying construction of Arctic LNG-2.
Back when the FID on Arctic LNG-2 was taken, the political landscape was very different. The project was set to rely extensively on Western technology and equipment. Germany’s Linde was hired to provide the critical liquefaction technology, while other foreign contractors involved included France’s TechnipEnergies and GTT, Italy’s Saipem, Germany’s Siemens and US giant Baker Hughes. Those contractors withdrew within months of conflict breaking out in Ukraine.
Financing for the project may prove another obstacle. Its cost was initially estimated at just over $21bn, but Novatek later confirmed that the sum had ballooned to $25bn. Russian financiers including Sberbank, Gazprombank, VEB.RF and Bank Otkritie had agreed to provide €5.7bn ($6.2bn), but the lion’s share of the cost was to be covered by the project participants along with international lenders, almost all of which have now dropped their support.
Fortunately for Novatek and Moscow, significant construction on the first train had already been completed when the West began imposing sanctions on Russia in the wake of its invasion of Ukraine. And even if not installed already, a lot of equipment needed for the project had already arrived in Russia. This helps explain why Russia was able to bring the first train on time.
The fate of the second and third trains may be very different, however. Novatek for its part still insists that 2024 and 2026 deadlines for their completion will still be met. Construction on the third train only started in October last year. It is difficult to determine whether this will indeed be the case. LNG is one of the sectors of the Russian oil and gas industry that was particularly dependent on foreign technology, equipment and expertise prior to sanctions, and this remained mostly the case despite a government push to develop domestic capability.
Still, Russia has made some advances. Some years ago Novatek developed its proprietary liquefaction technology known as Arctic Cascade, designed specifically for Arctic conditions. It makes use of cold ambient temperatures in the region to increase efficiency and thereby reduce costs.
Novatek trialled the use of Arctic LNG-2 at a fourth, small-sized LNG trains at its existing Yamal LNG facility, also in the Arctic. However, operations were initially not that smooth. The launch of the plant was repeatedly delayed. It finally reached its full capacity of 900,000 tpy in the summer of 2021. But Novatek CEO Leonid Mikhelson was quoted in September that year as lamenting that the technology “works, but it is bad.” The company head also blamed Russian manufacturers for poor workmanship on the needed equipment, noting that the company had brought claims against almost all the
115 RUSSIA Country Report February 2024 www.intellinews.com