Fog thickened over liquefied gas

Rushimalliance (Gazprom and Rusgazdobycha have 50% each) postpones the launch of a project to build a gas processing and LNG plant in Ust-Luga by two years, until the end of 2026, due to the departure of the German EPC contractor Linde, said Governor of the Leningrad Region Alexander Drozdenko. At the same time, the project operator is thinking about expanding LNG capacities, due to the fact that after the explosions at Nord Stream, there was nowhere to deliver up to 18 billion cubic meters of processed gas. Gazprom does not comment on changes in the project. According to experts, in the case of increasing capacities, the shift in the timing of the project commissioning may turn out to be even more significant.

The construction of the Ruskhimallyans plant (Gazprom and Rusgazdobycha each have 50%) for processing and liquefying gas in Ust-Luga is being postponed by two years, Governor of the Leningrad Region Alexander Drozdenko announced on August 1. Gazprom did not provide any comments at the time of preparation of the material.

“Yes, Linde did not act like a partner, it is clear that this is not their desire … Today, investors are actively working on other markets, on replacing technologies, and this is working. According to my information, I cannot disclose all the details, partners appeared who guaranteed the provision of certain bottlenecks in technology that were critical with the departure of Linde, ”said the governor (quoted from “Interfax”).

The implementation of LNG projects in the Russian Federation is hampered by the imposition of EU sanctions prohibiting the supply of key equipment for large-tonnage liquefaction.

The German Linde, as the EPC contractor for the Ust-Luga project, was responsible for the supply of key equipment, but withdrew from the project after the outbreak of hostilities in Ukraine (see Fig. “Kommersant” dated June 21, 2022). Rushimalliance responded by initiating arbitration proceedings. Now Gazprom is trying to attract Chinese suppliers to the project.

Rushimalliance is building an integrated gas processing and liquefaction plant in Ust-Luga. The source of raw materials for the project should be the old fields of Western Siberia, where a large amount of ethane-containing (wet) gas is produced. As a result of its processing, it is planned to produce up to 4 million tons of ethane and 2.2 million tons of liquefied hydrocarbon gases per year. Most of the methane from the project will be liquefied, allowing the production of 13 million tons of LNG per year on two lines. In October 2021, the company announced that it was going to build a third line for 6.5 million tons. The first line was supposed to be launched at the end of 2024, the second – in 2025. The remaining (dry) gas after processing, up to 18 billion cubic meters per year, was planned to be exported through the Nord Stream gas pipeline system, but it was blown up in September 2022.

Now, in the absence of Nord Stream, according to Drozdenko, Gazprom is exploring an increase in LNG capacity in order to monetize dry gas.

“All the fat from the gas will be collected, but what will be done with dry gas is a crossroads for Gazprom. On the one hand, we are probably discussing the construction of another gas liquefaction plant in the same location. Or go all the same in the hope of restoring partnerships, at least economic ones, in order to send dry gas to Europe,” he explained.

There are no direct EU and US sanctions on gas supplies from Russia. However, the Rushimalliance project may experience difficulties with implementation in foreign markets, since European countries impose restrictions on the conclusion of new contracts with Russian suppliers and refuse to renew already concluded long-term contracts.

Assuming that all 18 billion cubic meters of dry gas will be liquefied, this means the construction of almost four liquefaction lines with a total capacity of 26 million tons, independent expert Alexander Sobko notes. Sergei Kondratiev from the Institute of Energy and Finance believes that the delay of the project in the event of an increase in capacity may be longer, since “it is unlikely that Russian factories and partners from friendly countries will be able to ensure the supply of equipment in such a short time.” An alternative, in his opinion, could be the construction of complexes for the production of ammonia or methanol: in this case, the choice of designers and suppliers is greater, but potential markets are smaller. “At the same time, I would not rule out the option of changing design solutions: reducing the capacity of the gas processing plant or shifting the second stage beyond the horizon of 2030. This may not be an easy option for the region and investors, but it reduces the risks of delays and project management,” he notes.

Tatyana Dyatel