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Russia Plans To Allocate $800 Million For LNG Tankers

By Vusala Abbasova July 11, 2019

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The Arctic LNG 2 project is the second LNG export project building by Novatek, one of Russia’s largest natural gas producers. / lngworldnews

If you think working in Manhattan or Boston in the winter is brutal, try exploring energy deposits in the Arctic region. That is precisely what Russian scientists and experts will be doing, as Moscow looks to expand the country’s natural gas export potential.

Nearly 50 billion Russian rubles ($800 million) have already been allocated to construct liquified natural gas (LNG) carriers for the Arctic LNG 2 project, expected to start in 2023. Denis Manturov, Russia’s industry and trade minister, told journalists about government support to the Zvezda Shipbuilding Complex, a Rosneft-led shipyard that together with Russia’s shipping company Sovkomflot PJSC, will construct the vessels.

“I can only say that approximately the total amount of subsidies, taking into account 15 gas carriers, will be about 50 billion rubles, but the final calculation has not yet been made,” RIA Novosti quoted Manturov as saying on Tuesday.

Russia, as a leading global producer and exporter of conventional natural gas, intends to grow its LNG potential amid the escalating pressure coming from Washington reflected in sanctions. In 2017, the Trump Administration released the Countering American Adversaries Through Sanctions Act in order to push for Europe to abandon multi-billion energy projects with Russia, including the Nord Stream-2 underwater pipeline.

The Arctic LNG 2 project is the second LNG export project building by Novatek, one of Russia’s largest natural gas producers. Located on the Gydan Peninsula in northwestern Siberia, the Arctic LNG 2 plant is being designed to produce an estimated 6.6 million tons of LNG per year for each of its three lines, or 19.8 million tons overall.

Novatek controls a 90 percent stake in the project, while the French oil and gas company Total holds a 10 percent share. However, Novatek’s ownership stake will shrink to 60 percent when deals struck with Chinese and Japanese partners come into force.  

At the G20 summit held in Osaka, Japan last month, the Japanese energy consortium of Mitsui&Co and Japan Oil, Gas and Metals National Corporation acquired a 10 percent share each in Novatek’s Arctic LNG 2 liquefied natural gas project. The agreement was signed in the presence of Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin.

Last month Novatek also signed an agreement with two Chinese companies, China National Petroleum Corporation and China National Offshore Oil Corporation (CNOOC), under which the two will also get a 10 percent stake.

“We are very glad that CNOOC has joined our Arctic LNG 2 project as our new partner, since China represents one of the key consuming markets for our LNG sales,” RT quoted Leonid Mikhelson, Novatek’s chairman, as saying last month on the sidelines of the St. Petersburg International Economic Forum.

Mikhelson also emphasized that Novatek plans to sell around 80 percent of its production from the Arctic LNG 2 project to customers in the Asia-Pacific region, while the remaining 20 percent will be exported to Europe.

Russia, holding the world’s largest natural gas reserves, currently possess two LNG plants, including the Gazprom-led Sakhalin LNG plant situated on Sakhalin Island, which has an annual capacity of 9.6 million tons of LNG; and the three-train Yamal LNG plant, which has proven reserves of 683 bcm of gas.