Gas will flow from the Arctic

The government is going to allow the free export of gas in the form of LNG from fields in the Arctic, hoping to triple production within seven years, to 100 million tons per year. In fact, liberalization will turn out to be limited, since it will mainly affect NOVATEK’s projects, which already had the opportunity to gain access to exports. Other companies with fields in the Arctic, such as Rosneft, have tentative plans for LNG production. The situation is also aggravated by sanctions that make it impossible to use Western equipment for liquefaction.

The government wants to allow the export of gas in the form of LNG from fields located in the Arctic (north of 67 degrees north latitude), Prime Minister Mikhail Mishustin said on March 9 at a government meeting. We are talking primarily about the territories of the Krasnoyarsk Territory, YaNAO and NAO with a resource base of 3 trillion cubic meters of gas.

Now only Gazprom and its subsidiaries have the right to export LNG without restrictions.

NOVATEK received the right to export only to the sites, licenses for which were issued before 2013 and contained a special condition on the direction of gas for LNG production. However, in 2020, this list of sites was expanded, for which it was necessary to change the law. Rosneft has the right to export in the form of LNG only gas produced on the shelf. The company unsuccessfully tried to obtain an LNG export license for onshore fields in the Nenets Autonomous District under the Pechora LNG project, but after being refused, it sold the asset.

Western sanctions have now blocked Russian companies from accessing large-capacity gas liquefaction technologies, as well as key LNG production equipment. This is likely to affect the timing of the launch of new projects.

The new amendments developed by the Ministry of Energy do not significantly expand the range of subsoil users who will now be able to export LNG. First of all, NOVATEK will no longer need to ask again to change the law in order to export gas from its assets in Yamal and Gydan.

Apart from NOVATEK, among the independent gas producers, none of the companies has formulated clear plans for the construction of new LNG plants. Even before the sanctions, Rosneft considered the possibility of building an LNG production facility (35-50 million tons) on the basis of the Vostok Oil project in Taimyr. The oil phase of the project is due to start in 2024, but there is significant uncertainty in the timing of completion of infrastructure construction. Theoretically, the possibility of creating an LNG plant could be considered by Igor Yusufov’s Yamal Shelf Company, which received a number of licenses in the Baidaratskaya and Obskaya bays.

According to Mr. Mishustin, export liberalization will increase production to 100 million tons of LNG per year in the next seven years, although now it does not exceed 33 million tons.

At the same time, the Ministry of Energy last year predicted production of 80-120 million tons by 2035.

According to the head of the consulting center “Gekon” Mikhail Grigoriev, all significant LNG production projects in the Nenets Autonomous Okrug, Yamalo-Nenets Autonomous Okrug and the Krasnoyarsk Territory of varying degrees of probability of implementation are located north of the 67th degree. These are at least nine projects specified in the long-term LNG production development program adopted in 2021: NOVATEK’s Yamal LNG projects, Arctic LNG-2 under construction, probable Obsky LNG and Arctic LNG-1, possible Arctic LNG-3 and potential projects of Rosneft (Kara LNG and Taimyr LNG), Gazprom (Shtokman and LNG at the Tambeyskoye field). The tenth project mentioned in the program, Pechora LNG, has now been transformed into methanol production. In theory, the decision made makes it possible to stimulate LNG production at a significant number of projects that have not yet been designated, Mikhail Grigoriev believes.

Dmitry Kozlov