Russian LNG is more than just gas
The NOVATEK-Murmansk enterprise for the installation of process lines for liquefying natural gas (LNG), where Russian President Vladimir Putin recently visited, is changing the development of the LNG industry in the Eastern Hemisphere.
In the Chinese and Japanese markets, NOVATEK and Gazprom are already competing with Australia, Qatar, and other LNG suppliers. Indirectly, the implementation of the Arctic LNG-2 project can be considered a response to Western sanctions. The project is on schedule, despite anti-Russian restrictions. The launch of three lines with a total capacity of 19.8 million tons is envisaged. The first will start work this year, according to a correspondent for The Moscow Post.
The Center for the Construction of Large-Tonnage Marine Structures (CSKMS) is located in the Murmansk Region, in the village of Belokamenka. There, Vladimir Putin took part in sending a whole plant to the field - the first technological line "Arctic LNG - 2." The structure of 25 floors and 345 meters long is mounted from 14 modules on a base weighing more than 600 thousand tons.
Two dry docks of the CSKMS are designed for the construction of similar gravity-type foundations and the manufacture of modules of the "upper floors." Bases (platforms) are large-scale structures. At the installation site, they are held on the seabed by their own weight and connections to the soil.
Plant Manufacturing Plant
CSKMS assumed the functions of equipment integrator, construction of individual modules and final assembly of liquefaction lines on such floating bases. By order of the Government of the Russian Federation dated 17.06.2015 No. 1129-r. CSCMS has been assigned the status of a strategic investment project.
According to Vladimir Putin, LNG production has a comprehensive impact on the development of the country's economy. On the basis of CSKMS, technologies are localized. In the process of manufacturing technological lines, about eight hundred Russian enterprises are involved, more than 80 thousand jobs have been created, including more than 17 thousand in the Murmansk region alone.
Almost completely ready for operation, NOVATEK's plant is now being tugged to the Utrenneye field on the Gydan Peninsula, to which it is necessary to overcome a segment of the Northern Sea Route (NSR) 1600 km to the region, where about 20% of Russian gas reserves are concentrated.
NOVATEK plans to complete work on the second same module for the Arctic LNG-2 project in August 2024. After the second module leaves the dock, the construction of Murmansk LNG will begin, also with three lines of 6.8 million tons each. The first stage can earn in 2027, the second - in 2029. The products of this LNG plant will go to the markets of countries in "warm waters," where delivery does not require ice protection of the hull of a ship carrying fuel.
Will it be Europe's market? Maybe. Russia already occupies a prominent place in the world market and claims to become a leading player by 2030, when the Russian share in global LNG trade will grow to 20%. As for Europe, LNG accounts for about 40% of gas imports, almost half of which is bought on the spot market, where prices are two to three times higher than on pipeline gas. In June, Russia was ahead of Algeria and the United States in the Spanish market. According to the results of the first half of the year, "our gas" took third place there.
Licensors are gone, China has come
Part of the high-tech equipment for the Arctic LNG-2 project had to be developed from scratch after Western companies refused to fulfill their obligations. Some components of the complex assembled at the CSKMS were imported even before the imposition of sanctions.
In April last year, as part of the fifth package of EU sanctions, decisions of London and Washington, the supply of technologies and equipment for LNG projects to Russia was prohibited. Such licensors and manufacturers of LNG equipment as APCI, Linde, Shell, Air Liquide and others left Russia.
It was not easy. As the participant of the project told the "Kommersant" newspaper correspondent, the group of key employees of the TsSKMS was replenished with recruits: "People began to move to us from Siemens, from Honeywell, but with Baker Hughes it was the hardest, because we bought everything new from them, and it was a gas turbine - a prototype, beta version!.. And there were no Russians".
Baker Hughes refused to supply LM9000 gas turbines. In total, the American company was supposed to supply about 20 such turbines with a capacity of up to 75 MW for all three Arctic LNG - 2 lines, but delivered four. Russian media reported that the Chinese Harbin Guanghan Gas Turbine Co. could become the supplier of turbines for power supply to the Arctic SPG-2 plant. Ltd, part of China Shipbuilding Industry Company. The company was to supply turbines for the first two lines of the project, each requiring about 150 MW of capacity.
In addition, Bomesc Offshore Engineering supplied a process module for Arctic LNG-2 for the separation of liquid fractions of natural gas. The unit weighing almost 12 thousand tons was delivered from the city of Tianjin. Earlier, also the Chinese company Wison Offshore & Marine supplied its modules for the project. The company is known for developing equipment for floating TPPs operating on LNG, was engaged in the design and manufacture of modules for the first production line of the Arctic LNG-2 plant.
There is little information on this in open sources. Specialists in the field of options for the layout of equipment for LNG lines say that Novatek is considering the construction of an onshore gas turbine power plant, as evidenced by the application for public discussions No. MO-21-04-2023-18, filed by Arctic LNG-2 LLC on April 24, 2023.
Few who expected
"Novatek" at the Arctic Cascade project introduced medium-tonnage production, built the Portovaya LNG plant with a capacity of 1.5 million tons per year. In the West, there are few who expected that Russia would be able to master the assembly of multi-tonnage LNG lines. Some experts said that scaling medium-tonnage installations is unprofitable, that the launch of Arctic LNG - 2 will have to be postponed.
Fortunately, the industrial base in Russia has been preserved, including such as PJSC Cryogenmash, JSC Machine-Building Plant ZiO-Podolsk (Rosatom Group), Concern East Kazakhstan Region Almaz-Antey, JSC Kazan Compressor Engineering Plant, JSC Teplochemmontazh, NPO Heliymash, LLC Gazprom LNG Technologies.
To implement LNG plans on a country-wide basis, the government in March 2021 approved the "Long-Term LNG Production Development Program," designed until 2035. It was clear that the experience of public-private partnership in the implementation of the Yamal LNG project could and should be replicated.
It was decided to subsidize R&D in the field of LNG, to involve Rosatom (OKBM Africantov) and Rostec (UEC-Saturn) in the development of technologies and equipment. NOVATEK received a preferential MET rate, the constituent entities of the Russian Federation - the right to reduce the regional parts of the income tax rate, as well as to provide property tax benefits for LNG projects.
Finally, natural gas production in the Russian part of the Arctic, LNG production and transportation are associated with the development of the Arctic regions of the country and the filling of NSR cargo flows. Here, the mood for the choice of long-term solutions fully affected. The Arctic route and powerful icebreakers will allow LNG to be sold to all parts of the world and all year round.
Exports are growing, buyers are different
In Russia, the first large-capacity LNG plant with a capacity of 9.6 million tons was built on Sakhalin (its actual capacity is 11, 2 million tons). By 2021, due to the Yamal LNG project, the export of this type of fuel increased to 33 million tons. The Arctic LNG-2 project will increase these capacities to 53 million tons.
Annual LNG production in the world by 2030 may grow by 70% to 640 million tons against 380 million tons in 2021. Then 372 million tons of LNG were sold around the world. In particular, 102 billion cubic meters of liquefied gas were delivered to Europe, freed from the "Russian gas put." In 2022, the import of LNG by the EU countries increased to 168 billion cubic meters, while Gazprom's exports fell.
Between August 2022 and March 2023, Europe reduced gas consumption by 18% compared to the average over the past five years, that is, by 50 billion cubic meters, against 15% as planned. High gas prices, a warm winter and a drop in industrial activity affected.
Japan, on the other hand, withdrew from the sanctions regime construction and engineering services for Arctic LNG-2, as well as the Sakhalin-1 and Sakhalin-2 projects. The issue, as reported by the relevant Japanese ministry, was discussed in the government of the country back in May. Russia's share in Japanese LNG imports exceeds 9%. LNG projects in the Russian Federation include Japex, ITOCHU, Marubeni, Inpex, Mitsui and Mitsubishi.
Among the shareholders of the Arctic LNG - 2 project: Novatek (60%), Total (10%), Chinese CNOOC (10%), a subsidiary of Chinese CNPC - CNODC (10%), as well as a consortium of Japanese Mitsui & Co and JOGMEC - Japan Arctic LNG (10%)
The connection between these three points on the map of Russia is the Northern Sea Route, a transport artery that becomes strategically important for the oil and gas industry, and the Gydan Peninsula becomes its logistics center. Part of the Arctic LNG-2 products will go to transshipment complexes in Murmansk, the bulk of the LNG produced will be overloaded in Kamchatka.
They decided to build a storage warehouse "Koryak UGS." This structure is 400 meters long, 60 meters wide and a draft of 12.2 meters, will accommodate a quarter of a million tons of LNG. The complex will include two such warehouses. The regional government is interested in this project because it plans to build a regasification complex for receiving LNG in the Cancer Bay of Avacha Bay. LNG will come both from the Koryak UGS IPC in Bechevinskaya Bay and from the Sakhalin-2 LNG plant controlled by Gazprom.
NOVATEK plans to include Arctic LNG 3. Another head of the company, Leonid Mikhelson, said that after the completion of the construction of Arctic LNG-2, the company plans to introduce three more LNG lines. This, apparently, will be the Murmansk LNG plant. The western export direction, where gas carriers of the non-food class can go, will also develop. Europe will have something to count on!
Photo: Evgeny Razumny / "Vedomosti"