Russia’s Arctic LNG 2 production to start in 2023

Author: Hendrian Sukardi

2019/09/05

• First LNG cargo from 2023

• NOVATEK still seeks other potential partners

• Project more competitive than projects in US, Canada

SINGAPORE (ICIS)--A final investment decision was taken on the Russian 19.8mpta Arctic LNG 2 plant on 5 September, according to a tweet by Russia’s Ministry of Energy, and followed up by confirmation from developer NOVATEK and shareholder Total.

“For Russia, this is a very important project that is fully consistent with Russia’s strategy to build capacities and produce LNG,” said Russia’s Minister of Energy Alexander Novak.

This is the largest NOVATEK project with an investment of $21bn.

The plant will consist of three 6.6mtpa trains.

First production should come in 2023, said Total, with Train 2 starting in 2024 and Train 3 in 2026.

Russia’s independent producer NOVATEK has a 60% interest in the project.

Total, China’s CNOOC, CNPC and a consortium of Japanese trader Mitsui and state-owned Japan Oil, Gas and Metals National Corporation (JOGMEC) each hold a 10% stake. Total also has a 19.4% stake in NOVATEK.


LOW-COST PRODUCER

The Arctic LNG 2 project is competitive compared with LNG projects in the US and Canada, despite the plant’s distance from northeast Asia in winter, said Wood Mackenzie Asia Gas Director Nicholas Browne.

“We think the project benefits from extremely low-cost gas which we estimate can be produced at less than $1/MMBtu,” he said.

“The key cost uncertainty is around shipping given the differences in shipping between winter when ships will go via Europe and in the summer when ships can use the Northern Sea Route.

“Using the northern sea route, means Arctic-2 is the second cheapest option after Qatar for new projects delivering LNG to northern Asia,”

The Russian government recently approved the construction of a trans-shipment base near port city of Murmansk, to support the delivery of cargoes from NOVATEK’S Yamal plant.

NOVATEK also plans to construct a storage and trans-shipment facility in the Russian Far East region of Kamchatka. That facility will largely be used to service customers in the Pacific basin.

The Arctic LNG 2 plant follows recent investment decisions for projects in Canada, US and Mozambique as the next wave of production starts to take shape .