Final investment decision made on Arctic LNG 2 project

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Novatek and its partners have approved a final investment decision (FID) for the $21.3bn Arctic LNG 2 project, which comprises the development of the Utrenneye field and the construction of a natural gas liquefaction plant on the Gydan Peninsula in the Russian Arctic region.

The installation of three concrete gravity-based structures in the Gulf of Ob, on each of which will be located a 6.6mn t/y liquefaction train, will contribute to significant capex reduction (more than 30% per tonne of LNG) compared to Yamal LNG, according to project partner Total. Also, the close proximity to Yamal LNG will allow Arctic LNG 2 to leverage synergies with existing infrastructure and logistics facilities. The first Arctic LNG 2 train is due onstream in 2023, with the second and third to be launched in 2024 and 2026, respectively.

Arctic LNG 2 production will be delivered to international markets by a fleet of ice-class LNG carriers that will be able to use the Northern Sea Route and the transshipment terminal in Kamchatka for cargoes destined for Asia and the transshipment terminal close to Murmansk for cargoes destined for Europe.

The majority of the Arctic LNG 2 project’s equipment manufacturing and materials fabrication will take place in Russia. A consortium of TechnipFMC, Saipem and NIPIGAS (Russia) has been awarded the contract for engineering, procurement and construction of the LNG plant, with the design and construction of gravity-based structures to be undertaken by the Russian company SAREN, a joint venture of RHI Russia and Saipem.

‘Novatek has emerged as one of the key players of the global LNG market with the successful launch of Yamal LNG,’ commented Novatek Chairman of the Management Board Leonid Mikhelson, who noted that the FID represented ‘another step forward in our goal to become one of the largest LNG producers in the world’. He continued: ‘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.’

The Arctic LNG 2 project partners are Novatek (60%), Total (10%), CNPC (10%), CNOOC (10%) and the Japan Arctic LNG consortium of Mitsui & Co and JOGMEC (10%). (Total also owns an 11.6% indirect participation in the project through its 19.4% stake in Novatek, giving it an aggregated economic interest of 21.6% in the project.) 

In other news, Novatek and Saibu Gas have signed a heads of agreement to establish a joint venture focused on marketing LNG and natural gas to end-customers and developing the business for bunkering and gas-fired power generation in Japan and the Asian region, as well as constructing and operating a new LNG storage tank at the Hibiki LNG terminal.

Novatek has also signed an MoU with Petronet LNG regarding future natural gas cooperation. The MoU envisages delivering LNG supplies from Novatek’s portfolio to the Indian market, including natural gas supplies for power generation, as well as investment by Petronet LNG in Novatek's future LNG projects. The two companies also plan to jointly market LNG as motor fuel in India, including joint investment in developing a network of service stations and a fleet of LNG-fuelled trucks.

‘India’s rapid economic growth requires increasing demand for all sources of energy and, primarily, for natural gas as the most environmentally friendly type of fuel. Moreover, the conversion of modal transport to LNG enables India to significantly reduce carbon emissions, thereby contributing to India’s commitment toward reducing its impact on climate change,’ comments Mikhelson. ‘Our low-cost production from future Arctic LNG projects ensures competitively priced LNG supplies to most regions of the world, and we are confident that our mutually beneficial cooperation with Petronet LNG will promote the supply of affordable clean burning natural gas to the Indian market.’

Novatek has emerged as a key player on the global LNG market following the successful launch of Yamal LNG in 2018
Photo: Novatek

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