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Russia seized the Arctic in defiance of sanctions
Material posted: Medvedev DmitryPublication date: 19-02-2015

Domestic companies, backed by their foreign partners continue to develop projects for the extraction of oil and gas in the Russian sector of the Arctic. In this they are supported by the Russian government and the polar climate.

This month in Russia offers a regular passenger air service to one of the most Northern settlements of our country - the village of Sabetta, located on the northeastern tip of the Yamal Peninsula (Yamalo-Nenets Autonomous Okrug). This became known after the new Russian airport Sabetta few days ago has successfully landed and off the plane Boeing 737-400 of airline "Yamal", on Board of which were employees of the project Yamal LNG and its contractors. This year through Sabetta, where 10 years ago, there were less than two dozen people may take the flow of passengers from Moscow and Novy Urengoy with up to 150 thousand people. In subsequent years the number of passenger traffic through the Russian Arctic, a new airport will increase to more than 300 thousand people per year.

The developments in Sabetta and around it reflect the position of the Russian government and domestic (and domestic) oil and gas companies for hydrocarbon production in the Arctic. That oil and gas there is a gigantic number, knew in Soviet times - the majority of hydrocarbon fields in the Arctic were discovered and well explored in the 70-80-ies of the last century. However, no efficient technologies of their development. "There have been several attempts, even during Soviet times, to learn, for example, the Bovanenkovskoye field. But technology was not. It is very important that we understand that we now have such technology for the development of the Arctic, which will bring minimum damage to the environment"- stressed the Governor of Yamal Dmitry Kobylkin.

The emergence at the turn of the century new technologies for the extraction and transportation of hydrocarbons called "second wave" of interest in the polar deposits. Gazprom, for example, in the fall of 2012 launched on the Yamal Peninsula the first turn of one of the world's largest gas condensate fields - Bovanenkovskoye, "Gazprom Neft" on the same Peninsula has commenced development drilling at the Novoportovskoye oil field, and NOVATEK have taken on the Yamal Peninsula to implement the most ambitious domestic project, the liquefied natural gas project "Yamal LNG".

Fallen twice in the second half of last year the price of oil and U.S.-European economic sanctions at this point against Russia, has led many analysts to predict that the projects would soon die. However, contrary to these predictions, "second wave" of industrialization of the Arctic that occurred in the Central part - on the Yamal Peninsula, and did not think "to subside". At the end of last year "Gazprom" without much noise, but, as planned, launched the second phase of the Bovanenkovo (gas field No. 1) with the capacity of 30 billion cubic meters of gas per year. "Gazprom oil" started in January to build the second phase of the pressure oil pipeline from the Novoportovskoye field to Cape Kamenny, where a marine oil tankers along the Northern sea route delivered to European consumers. Its commissioning in 2016, will allow almost 10 times - to 600 thousand tons (the capacity of the first stage of the pipeline) to 5.5 million tons per year, increase oil production at this field.

In the most difficult situations were the project Company for the construction in Sabetta of the largest Russian plant for the liquefaction of natural gas - "Yamal LNG". First, it is one of the most expensive Russian Arctic projects - the cost together with the construction of Sabetta port at the beginning of 2014, according to public sources exceeded 1 trillion roubles. Secondly, NOVATEK, and Rosneft, one of the first Russian companies fell under American economic sanctions. Moreover, it is unclear, how this situation will behave the main European partner of NOVATEK project "Yamal LNG" - the French company Total, which owns 20% in Yamal LNG. Especially after in October last year, Vnukovo crashed head Total Christophe de Margerie, who was one of the most ardent supporters of this project, and the expansion of cooperation with Russia in General.... Third, unlike "Gazprom" projects in Yamal, the LNG plant NOVATEK is scheduled to start operation in 2017, which means he's still not yet able to generate revenue to cover the costs of this project.

However, as events have shown the beginning of this year, and this project is moving in the planned rhythm. In the framework of public-private partnership the construction of Sabetta port through which goods for the project "Yamal LNG" are delivered now year-round. This winter in wiring ships, keeping Sabetta , attended by two Russian nuclear icebreakers "Taymyr" and "50 years of Victory". They also provide icebreaking tankers exporting oil from the Novoportovskoye field "Gazprom oil".

The international airport located at Sabetta, certified category 1 the ICAO can now accept almost all types of aircraft, including heavy military transport aircraft Il-76. The construction of the LNG plant at Sabetta with a capacity of 16.5 million tons of gas per year, and construction of the South-Tambeyskoye gas condensate field, which will become its resource base. That is, the project, according to the head of the company "total exploration development Russia" Jacques de Boisseson, already implemented by 20-25%. And the French will continue to participate in it. "Our course towards Russia remains unchanged, the same as he was when Christophe de Margerie. All difficulties are of a temporary nature - in the middle of the crossing makes no sense to turn back," said Jacques de Boisseson at a recent meeting with the Minister of energy of Russia Alexander Novak.

This year for the "Yamal LNG" will be decisive. "Budget "Yamal LNG" for 2015 is approximately equal to the size of the investment made in all these years in the draft, including 2014, and is just over 8 billion dollars" - has transferred words of the head of NOVATEK Leonid Mikhelson RIA Novosti. In order to strengthen the financial stability of the project, 150 billion rubles "Yamal LNG" will be allocated from the national welfare Fund of Russia.

Naturally, the question arises, what to expect participants in these and other projects on extraction of hydrocarbons in the Russian Arctic. Reasons are probably at least three. The first is the demand. The report of the International energy Agency (IEA) World Energy Outlook 2014, published in November last year, said that by 2040 global gas demand will increase by more than 50%. Of course, to the projections of the IEA can be treated in different ways, including assessing them from the point of view of the global political situation. However, if you take the very near future - 2015, the barometer's second-largest consumer of oil and gas in the world - China, shows in the same direction. Projected state oil company CNPC (by the way, is also the shareholder of the Yamal LNG project with 20% share), oil consumption in China in 2015 will grow by 3%. But the estimated gas consumption will increase by 9.3 % and imports, including liquefied gas, is 10.2 %. Where to get this gas? Russia and China have already signed last year the agreement on deliveries to China from 2019 annually 38 billion cubic meters of Russian gas for 30 years. Resource base of this project will be the Chayandinskoye field in Yakutia with the prospect of connecting the Kovykta gas condensate field in the Irkutsk region. However, on 9 November last year, Gazprom and CNPC signed a framework agreement to begin to work together on the project of gas supplies to China and on the Western route, from the Yamal Peninsula. Because gas here is much higher than in Yakutia and the Irkutsk region, and there is a good opportunity to reduce the cost of production through full utilization of existing production and transportation infrastructure, and human resources. Huge gas reserves in the Russian Arctic (according to U.S. estimates, they may constitute up to a fifth of recoverable reserves of "blue fuel" on the planet), and Russia (and only Russia!) effective technologies of their extraction and transportation is the second reason that gas projects in the Central part of the Russian Arctic will continue, despite the volatility of prices.

The third reason, at first glance, paradoxical. We are used to the idea that the Arctic is complicated and expensive. Indeed, if we consider the classic process of oil extraction, its transportation, the cost of a ton of "black gold" in Saudi Arabia and in the Russian Arctic are significantly different. But liquefied natural gas production in the Arctic due to the nature of technology can do is about 20% cheaper than in the southern countries. So now in the Yamal-Nenets Autonomous district is considering another project of LNG plant of the same capacity, and Yamal LNG - 16.5 million tonnes per year. Resource base for it will be gas-condensate field giganskogo Peninsula.


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