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Gerald Jansen

Gerald Jansen

Gerald is an independent freelance energy analyst based in Rotterdam, the Netherlands.

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Russia’s LNG Boom Hinges On Foreign Tech

Arctic LNG

Living the seventh year of sectoral sanctions that target its prospective oil and gas projects, Russia has grown accustomed to living under pressure. Sanctions have made it much more difficult to lend money, more difficult to secure viable partnerships and get access to state-of-the-art technologies. Going beyond the day-to-day challenges, there is one thing that has been missing from Russia’s portfolio – a breakthrough within its import substitution drive. Developing and commissioning its own liquefaction technology might have been just that, a resolute statement that Russian companies can overcome the technological arrears in a sector that had previously been underrepresented or just simply put on the back burner. Yet that is hardly what we see right now.

Arctic Cascade was destined to become the jewel in the crown of Yamal LNG. The first patented Russian technology to liquefy natural gas, Arctic Cascade was poised to decrease liquefaction costs by utilizing the naturally cold climate, with the port of Sabetta located beyond the Arctic circle. A conventional LNG terminal would use 3 compression cycles, using propane, ethylene and methane as coolants. Arctic Cascade, on the other hand, would first separate ethane from the natural gas to be processed only to use the same ethane molecules as coolant in the first round of liquefaction – the second cycle is then carried out with refrigerated nitrogen as cooling agent. Thus, NOVATEK argues, Russian companies in the Arctic might save on energy costs by utilizing Arctic temperatures. 

The first LNG project that NOVATEK has carried through was overall Russia’s first Arctic one, Yamal LNG. It was designed and developed by the Franco-Japanese consortium of Technip, JGC and Chiyoda with liquefaction technology provided by Air Products. In terms of sticking to project deadlines, the launch of the first three liquefaction trains was an undisputable success – in fact the commissioning phases were so smooth that Train 3 started up twelve months ahead of schedule in December 2018, bringing the total production capacity to 16.5mtpa LNG. The last piece of the Yamal LNG jigsaw puzzle was missing still, the fourth train was to be based on the Arctic cascade technology. Wary of taking on a task too big, the proprietary train carried a nameplate capacity of 0.94mtpa, i.e. almost six times lower than the “regular” ones.

The first real deadline was initially set for Q4 2019, however this was quickly rescheduled for Q2 2020, then Q3 and so on. To cut a long story short, Arctic Cascade is still far from being launched. There is very little substantiation on the causes of the delay, Russian media reports bluntly state that there remains a fundamental problem that remains to be solved. What would it mean for NOVATEK’s immediate future? The forthcoming Arctic LNG 2 is still to run on liquefaction technology that the project company bought from Linde, i.e. remains more or less insulated from the travails of Arctic Cascade. The three 6.6mtpa liquefaction trains of Arctic LNG 2 are assumed to be launched in 2023-2024-2026, with all of its production capacity already covered by long-term offtake agreements. Related: Asian Refinery Margins Crash To Nearly $0

At the same time, there is a larger picture at hand with Obskiy LNG as it should have been NOVATEK’s first own-led project, using proprietary liquefaction technology so as to minimize technological exposure against the background of US/EU sanctions. Renouncing on foreign liquefaction technology providers, Obskiy LNG was created with the purpose of using Arctic Cascade as its base liquefaction technology. Initially the project was assumed to have three 1.6mtpa liquefaction trains, smaller in scale than Yamal LNG, thus becoming Russia’s first-ever domestically developed LNG terminal. Absent any technological breakthrough, it is a fully feasible alternative that Obskiy LNG would be steered away from LNG. Recent utterances from NOVATEK top management seem to indicate that the Russian firm is gauging the viability of producing blue ammonia from the two dedicated gas fields – Verkhne-Tiuteyskoye and Zapadno-Seyakhinskoye.

The two-year delay in commissioning Arctic Cascade has triggered the first high-rank personnel changes. Evgeniy Kot, the LNG head of the Yamal LNG project company, is reportedly slated for an impending dismissal as the top management NOVATEK grows increasingly impatient with the seemingly non-existing progress of the 4th liquefaction line. This is quite a development considering that Kot has been working at NOVATEK for almost two decades and has managed to head Yamal LNG in Russia’s ever-changing environment for seven years already. Rerouting the $0.5 billion Arctic Cascade project into a blue ammonia project might trigger even more substantial changes within the Russian firm.

Overall, even if Obskiy LNG remains a liquefied gas project, the implications of Arctic Cascade being this much in delay are manifold. First and foremost, it is highly unlikely that Obskiy LNG will be designed, built and operated solely on the basis of Russian technologies, despite the initial assumptions. Potentially corroborating such concerns, NOVATEK has reportedly sought out foreign producers of turbines as domestic suppliers simply lack the know-how to build fitting equipment for Obskiy LNG. Second, the totality of LNG-relevant developments foreshadows that Russia’s import substitution drive will most probably become a drive for localizing foreign technologies rather than a genuine industry game-changer whereby domestic Russian companies produce equipment of equivalent or superior quality.


By Gerald Jansen for Oilprice.com

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  • Kay Uwe Boehm on June 03 2021 said:
    Local LNG distribution without cooling in 1000+ bar 2.4m 2t pebble tanks 5 connected 40" ISO container for fuel stations and home etc offering also double density 700+ bar CNG.
  • Mamdouh Salameh on June 03 2021 said:
    Despite the most intrusive US sanctions since 2014, Russia’s economy has managed to overcome the adverse impact of these sanctions and flourish. Moreover, Russia has achieved great success in the development of the oil and gas resources in the Russian Arctic or what I describe as Russia’s ‘Wild West’ to borrow a phrase from American history.

    Russia’s success is exemplified by Novateck LNG company’s success. Novatek plans to build out its LNG export capacity up to 70 mtpa by 2030. This, in turn, dovetails into Russia’s plans for LNG production of 80-140 mtpa by 2035, which would be greater than that of the world’s two largest producers Qatar and Australia. Moreover, it will be possible to deliver LNG into northeast Asian markets on a sustained basis for ‘a little over’ $3 per million British thermal units (MMBtu).

    Furthermore, Novatel partners in the Arctic LNG-2 project have now also concluded 20-year deals to take LNG from the plant. The sales agreements will cover total LNG production from the facility as from when that begins in earnest in an expected 2023.

    Like all state-of-the-art technologies, the Russian Arctic Cascade technology has had some hiccups but they will soon be sorted out. President Putin has insisted that the development of the Russian Arctic must be accomplished with homegrown technologies and Russian money.

    The country that sent the first man into space is more than capable of developing mundane technologies needed for LNG production.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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