{"id":3056,"date":"2019-04-12T05:57:50","date_gmt":"2019-04-12T05:57:50","guid":{"rendered":"http:\/\/euromenaenergy.com\/?p=3056"},"modified":"2019-04-12T05:57:50","modified_gmt":"2019-04-12T05:57:50","slug":"russia-eyes-greater-energy-dominance-as-novatek-taps-arctic","status":"publish","type":"post","link":"https:\/\/emimer.com\/?p=3056","title":{"rendered":"Russia Eyes Greater Energy Dominance as Novatek Taps Arctic"},"content":{"rendered":"

Almost 1,500 miles from Moscow, the tiny port of Sabetta nestles in a desolate Russian Arctic peninsula. A former outpost for Soviet geologists, it\u2019s now the site of Russia\u2019s most ambitious liquefied natural gas project, operated by a company that only entered the market just over\u00a0a year ago.<\/p>\n

Several times a week, a giant tanker leaves this remote place carrying the super-chilled fuel to buyers in Europe and Asia. It\u2019s not the only LNG plant beyond the Arctic Circle, but it\u2019s by far the\u00a0largest.<\/p>\n

\"Yamal
\n
\n

Yamal LNG project\u2019s port of Sabetta.<\/p>\n<\/div>\n

Source: Novatek<\/div>\n<\/figcaption>
\n

Novatek PJSC, the main shareholder of the Yamal LNG plant, says plans for further projects will transform Russia into one of the biggest exporters of the fuel within a decade. Already the world\u2019s top exporter of pipeline gas and second-biggest shipper of crude oil, exports from Sabetta are giving President Vladimir Putin\u2019s Russia another conduit into the world economy for the country\u2019s unrivaled energy resources.<\/p>\n

\u201cRussia can be in the top four main LNG exporters,\u201d Novatek\u2019s Chief Financial Officer Mark Gyetvay said in an interview in London.<\/p>\n

Showcasing The Potential<\/h3>\n

Novatek has demonstrated that it\u2019s possible to produce and liquefy the fuel in such harsh conditions at competitive prices and ship it to markets thousands of miles away in Europe and Asia. That\u2019s helped by receding Arctic ice which is allowing a specially built fleet of strengthened tankers to ship fuel along Russia\u2019s northern coast.<\/p>\n

\"Arctic<\/figure>\n<\/div>\n

This week, Putin will tout the potential for development of Russia\u2019s hydrocarbons at the\u00a0International Arctic Forum\u00a0in St. Petersburg. Russia\u2019s leader has been a long-standing supporter of developing oil and gas resources locked under the region\u2019s permafrost. When opening the first production train of the Yamal LNG project in late 2017,\u00a0Putin said\u00a0the region gives Russia the opportunity to take up the fuel\u2019s \u201cniche it deserves.\u201d<\/p>\n

\u201cWe can boldly say that in this century and the next, Russia will expand thanks to the Arctic,\u201d he said at that time.<\/p>\n

Novatek, whose biggest shareholders include Russian billionaires Leonid Mikhelson and Gennady Timchenko, as well as French energy giant Total SA, became Russia\u2019s top LNG producer after starting up its plant in the Yamal peninsula almost two years ago. The facility reached its full capacity at the end of 2018, ahead of schedule, doubling Russia\u2019s share of the global LNG market to 8 percent.<\/p>\n

The gas producer has aggressive plans to command a 10th of the global market by 2030, Gyetvay said, and position Russia as one of the world\u2019s largest exporters alongside the U.S., Qatar and Australia.<\/p>\n

All three of Yamal LNG\u2019s production units, with a combined actual capacity\u00a0of 17.5 million\u00a0tons a year, are\u00a0now online. Novatek is attracting partners for a second plant, the so-called Arctic LNG 2 project, which is expected to\u00a0come online\u00a0in 2022.<\/p>\n

The company is also considering commissioning a third facility and\u00a0may increase\u00a0its LNG production target for 2030 by about 20 percent, to as much as 70 million tons a year.<\/p>\n

Novatek\u2019s resource base at two Arctic peninsulas — Yamal and Gydan — allows the company to\u00a0raise\u00a0production volumes to as much as 140 million tons a year in future, according to its chief executive officer Mikhelson.<\/p>\n

\"Joining<\/figure>\n

Russia, the world\u2019s largest gas exporter, has been slow to join the global LNG boom as it has focused investment on pipeline supplies to Europe. Until recently, the country had just one liquefaction project in operation, the Gazprom PJSC-led\u00a0Sakhalin 2\u00a0project near Japan with an annual capacity of about 10 million tons.<\/p>\n

The country has now taken an interest in the market for tanker-borne fuel amid growing global LNG demand and more difficult relations with its customers in the European Union.<\/p>\n

Vast Reserves<\/h3>\n

Russia\u2019s Energy Ministry pegs total gas in place within the region at about 210 trillion cubic meters, or over 70 percent of the nation\u2019s total. Novatek\u2019s Arctic gas reserves are \u201cconservatively\u201d estimated at about 3.3 trillion cubic meters, Gyetvay said.<\/p>\n

\u201cWe believe that Russia could be the fourth or even the third\u201d biggest holder of LNG production capacity, said Karen Kostanian, Moscow-based oil and gas analyst for Bank of America Merrill Lynch.<\/p>\n

\"Arctic<\/figure>\n

The resources are located more than 5,000 kilometers (about 3,100 miles) away from key markets in Asia and are almost 4,000 kilometers from the European trading hub at the port of Rotterdam. That requires extensive shipping capability.<\/p>\n

The freezing environment also means Novatek has to produce natural gas at temperatures as low as minus 56 degrees Celsius (about minus 69 Fahrenheit), according to regional government\u00a0data. This requires special techniques for construction\u00a0in permafrost areas, including installing pylons in ice, and for ships to navigate frozen routes.<\/p>\n

Furthermore, not only does Novatek manage in the harsh environment but it sees the Arctic\u2019s location as a competitive advantage, Gyetvay said, because the lower temperatures actually make production costs cheaper because less energy is needed to chill the gas.<\/p>\n

The cost of producing Yamal feedstock gas is only around $0.1 per million British thermal unit, whereas U.S. producers typically buy their gas on a market such as the Henry Hub, where prices are currently about $2.60.<\/p>\n

Eyes On The Prize<\/h3>\n

After starting up its $27 billion Yamal LNG project, Novatek is finalizing the partnership structure for the planned Arctic LNG 2 project.<\/p>\n

Novatek\u2019s potential has attracted investment from global players from Total to China National Petroleum Corp., a rare bright spot for Russia\u2019s energy segment hit by U.S. and European sanctions. While Novatek is on the American sanctions list, and the U.S. Congress is considering\u00a0restricting investment\u00a0in Russia\u2019s LNG facilities outside the country, it\u00a0won\u2019t impact\u00a0the start-up of Arctic LNG 2 or the company\u2019s longer-term expansion plans.<\/p>\n

Total, a shareholder in Novatek\u2019s first LNG project, last month signed a\u00a0deal\u00a0to buy a 10 percent stake in the second plant. The French major\u2019s commitment could prompt a rush of other potential partners to take stakes in the project, Gyetvay said.<\/p>\n

Whether other companies buy stakes in Arctic LNG 2 or not, Novatek will move forward with it regardless. The company is already doing pre-marketing for the future cargoes, discussing potential off-takers and volumes, Gyetvay said.<\/p>\n

Last week, Novatek signed 15-year agreements with\u00a0Vitol SA\u00a0and\u00a0Repsol SA\u00a0to supply each with 1 million tons of LNG a year from the Arctic LNG 2 and other projects.<\/p>\n

\u201cWe\u2019re basically at that point in time when the train has started to move and it\u2019s time to jump on or miss it,\u201d Gyetvay said.<\/p>\n

\u00a0With assistance by Adrian Leung, Tsuyoshi Inajima, and Rob Verdonck<\/em><\/p>\n

(Updates with production estimates by Novatek CEO in paragraph 12.)<\/div>\n
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Almost 1,500 miles from Moscow, the tiny port of Sabetta nestles in a desolate Russian Arctic peninsula. A former outpost for Soviet geologists, it\u2019s now the site of Russia\u2019s most ambitious liquefied…<\/p>\n","protected":false},"author":1,"featured_media":3070,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[46,48,57,90,96,107,113,137,139,160,174,183,184,201,202,209,230,232,233,244,246,249,256,267,277,279,288],"class_list":["post-3056","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-aramco","tag-athens","tag-baroudi","tag-democracy","tag-doha","tag-embargo","tag-energy-peace","tag-gas","tag-gazprom","tag-international-maritime-disputes","tag-lebanon","tag-maritime-boundaries-east-mediterranean","tag-maritime-disputes","tag-offshore","tag-oil","tag-opec","tag-poverty-alleviation","tag-putin","tag-qatar","tag-rosneft","tag-roudi","tag-russia","tag-saudi","tag-straddling-hydrocarbons-reserves","tag-total","tag-trump","tag-usa"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/3056","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3056"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/3056\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/3070"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3056"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3056"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3056"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}