Russia’s Novatek gives go-ahead to $21bn Arctic LNG plant

Siberian energy company Novatek has given the green light to a $21.3bn LNG plant in Russia’s Arctic region.

The Arctic LNG 2 project was announced yesterday (5 September) by Leonid Mikhelson, Novatek’s chairman, at the Eastern Economic Forum in Vladivostok. The $21bn scheme is expected to be completed in phases between 2023 and 2026.

Mikhelson said: "We are confident that the accumulated construction experience, state-of-the-art technologies, proven logistics solutions and partnerships with best-in-class international companies will ensure the effective implementation of our new LNG project.

"Our long-term strategy is to develop our vast low-cost hydrocarbon resources on the Yamal and Gydan peninsulas, as well as to maximise our cost competitiveness across LNG markets."

According to Novatek, Arctic LNG 2 will use "innovative gravity-based structures" and will source most of its equipment from manufacturers based in Russia. The construction work will be performed at Novatek’s own LNG construction centre, located near Belokamenka in the Murmansk Region.

The EPC contractors for the project will be the Franco-American energy specialist TechnipFMC, Saipem of Italy and Russia’s Nipigas. The design and construction of the gravity-based structures will be undertaken by a joint venture between Renaissance Heavy Industries of Russia and Saipem.

The plant, which will be built on the Gydan Peninsula in western Siberia, will liquify natural gas extracted from the Utrenneye field. It will consist of three liquefaction trains with a total production capacity of 19.8 million tons a year. The launch of the first train is scheduled for 2023, with the second to follow in 2024 and the third in 2026.

Novatek added that more than 90% of long-lead items, including cryogenic heat exchangers, gas turbines and the compressors for the liquefaction trains, had been ordered. It has already begun work on the drilling of production wells, and the construction of roads and the field’s production infrastructure.

Novatek has sold a 10% stake in the project to France’s Total, another 10% to Japan’s Mitsui and a 20% share to the China National Petroleum Corporation.

According to the Bloomberg agency, Novatek, whose biggest shareholders include Mikhelson and fellow Russian billionaire Gennady Timchenko, became Russia’s top LNG producer after bringing the Yamal LNG into operation two years ago.

Russia had an 8% slice of the global LNG market last year, which it wants to boost to 20% by 2035.

Image: Novatek’s Yamal plant, the largest LNG facility in the Arctic Circle (Novatek)

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