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The Arctic Is Russia’s Key To LNG Dominance

The Arctic area could become the key driver of Russia’s natural gas production in less than two decades, as it has the potential to produce 90 percent of all the gas produced in Russia by 2035, a senior government official said on Monday.

“The Arctic’s contribution in the oil and gas sector will continue to grow, we can really bring gas production to 90% of the national level and to a quarter of all oil production in Russia,” Alexander Krutikov, Russia’s Deputy Minister for the Development of the Russian Far East and the Arctic, said, as carried by news agency TASS.

Krutikov was presenting a strategy for the development of the Arctic regions in Russia, in which energy and chemicals will play leading roles.

The Arctic region is also key to Russia’s ambitions to be a dominant player in the global liquefied natural gas (LNG) market, Krutikov said.

Russia is supporting its companies with tax breaks, waivers on extraction taxes, and other incentives in order to develop its Arctic areas.

According to Yury Trutnev, Deputy Prime Minister and Presidential Plenipotentiary Envoy to the Far Eastern Federal District, government incentives will allow the leading Russian oil and gas producers Novatek, Lukoil, and Gazprom Neft to develop more LNG and chemicals projects in the Arctic.

Related: A ‘’Gusher Of Red Ink’’ For U.S. Shale

Novatek, for example, Russia’s largest private natural gas company, will receive a tax deduction of about US$626 million (40 billion Russian rubles) from the regional budget of Yamal-Nenets and US$1.56 billion (100 billion rubles) from the federal budget to build an LNG export terminal in the autonomous region in northwestern Siberia.

Novatek, which already exports LNG from the Yamal LNG plant, has just given the go-ahead to its second large LNG project, Arctic LNG 2 on the Gydan Peninsula.

In early September, the partners in the Arctic LNG 2 venture approved the final investment decision for the plant, whose first train is expected to come online in 2023. Trains 2 and 3 are set to become operational in 2024 and 2026, respectively. Total capital expenditure (capex) to launch the project at full capacity is estimated at US$21.3 billion equivalent, Novatek said.

By Tsvetana Paraskova for Oilprice.com

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