The first step of Russia towards the giant LNG
Material posted: Publication date: 15-12-2017
If not for the curves of the frozen rivers on this barren ground of the tundra, the landscape on the Yamal Peninsula could be called the epitome of monotony. The Peninsula looks almost deserted, but at 2 500 kilometres North-East of Moscow, the picture changes dramatically.

Only in the port of Sabetta in recent years, involved hundreds of workers, which helicopters delivered from the mainland — if severe weather conditions allow a landing. Now they have completed their work. Under the leadership of the private Russian gas company NOVATEK's project to produce liquefied natural gas, Yamal LNG has commissioned its first of three production lines.

On Friday, liquefied natural gas (LNG) was loaded on the first icebreaker. Now on the world market will be supplied 5.5 million tons of LNG per year. The Northern sea route, where in winter the ice thickness exceeds two meters, the gas will be transported to Asia.

A historic step

Global gas production is an outstanding event. NOVATEK became the first company in the world, to build a terminal for LNG North of the Arctic circle, where in winter the temperature drops below 50 degrees. USA has still not implemented a similar project in Alaska, though, unlike the Russian, they do not suffer from the sanctions.

Besides, the first private competitor is opposed to state gas giant Gazprom. While this competition is limited to LPG, however, NOVATEK is already broken here export monopoly Gazprom. It's like a paradigm shift in the Russian gas business.

Gazprom slept through the global turn toward liquefied natural gas and is almost entirely limited to the export of gas through pipelines, prompting criticism even from President Vladimir Putin. The enterprise for production of LNG was opened only in 2009 on the island of Sakhalin in the Pacific ocean. There are produced annually to 10.8 million tons of liquefied natural gas.

Construction costs are not exceeded

However, other LNG production projects Gazprom is constantly postponed, besides, the depreciation of the ruble over the past years has led to a significant increase in the cost of construction of such complexes.

In comparison with Gazprom, NOVATEK, proved to be a more ambitious. It is primarily the merit of the clever entrepreneur and the company's head Leonid Mikhelson, who managed not only just in time to begin production of LNG, but not to exceed the planned capital expenditures, contrary to the conventional in the industry practice.

62-the summer businessman, the owner of a quarter of the group "NOVATEK" and the main shareholder in the country's largest petrochemical company "SIBUR" 27 thousands of employees, the Forbes magazine in the spring for the second time in a row was named the richest Russian with a fortune of about 18,4 billion. Last year in an interview with the newspaper Die Welt, Michelson noted that it is, in fact, greatly complicate his life now that he cannot safely appear before journalists.

Total is also actively involved

Michelson soon realized that the need to rely not only on Europeans, but on China. Its petrochemical concern SIBUR is already working closely with China, after Chinese energy company Sinopec became a shareholder of his company.

In the project "Yamal LNG" — a similar picture. Here, Michelson invited the Chinese to come in: energy company CNPC owns a 20% stake, the Silk Road Fund, which also contributed to the financing of 9.9%. The rest belongs to the French energy group Total.

Meanwhile, Michelson has been running on the second energy project for production of liquefied gas under the name "Arctic LNG 2". On Friday, Mickelson said that "Arctic LNG 2" to be launched in 2023 and will supply the market with 18 million tons of liquefied gas.

It's more the fact that someday I will be able to produce "Yamal LNG". After the commissioning in 2019, all three production lines to the world market by sea will be shipped 16.5 million tons of LNG. Planned and the fourth line, which, as stated on Friday, Putin, given the anti-Russian sanctions will be constructed using only domestic technologies.

Tax incentives for manufacturers

For the global liquefied natural gas market Russia's offer is very low. According to statistics from the International gas Union, LNG production capacity worldwide increased last year to 336 million tons. If "NOVATEK" in seven or eight years will be put into operation all of its projects, Russia, including Sakhalin, the production of Gazprom, could supply 45 million tons.

With the volume of production in Russia is still very far from Qatar, the global market leader. But as a player on the world market, Russia has to be taken seriously. The persistence with which NOVATEK boosts its plans also reflects the desire of Russia to compete with all the new LNG producers in recent times is primarily the USA and Australia, but also Africa. Here the Russian government goes to such steps as tax breaks.

No domestic competition

The US is considered an enemy of Russia. Because, ultimately, they want to reduce the share of Gazprom on the European market with its exports of LNG, for which the sanctions act, trying to prevent the construction of the Baltic pipeline "Nord stream".

And yet a direct competition in Europe against the main U.S. exporter Cheniere Gazprom is the need for discipline. "NOVATEK" with the project "Yamal LNG" until — at the request of the Kremlin — is not aimed at the European market, not to create difficulties for Gazprom and the Russian side.

Eduard Steiner (Eduard Steiner)


Tags: Russia , gaz