Irkutsk Oil Company is thinking about gas liquefaction

The Irkutsk Oil Company (INC) is exploring the possibility of building a liquefied natural gas (LNG) plant in Ust-Kut (Irkutsk region), the company announced on June 13. As a representative of INK specified to Vedomosti, the plant’s capacity will be up to 100,000 tons per year. “The estimated processing volumes will be up to 250 million cubic meters. m of methane per year, ”the company quotes the words of CEO Yakov Ginzburg in a release.

The main consumers of the produced LNG, according to Ginzburg, will be the cities of the Irkutsk region, Transbaikalia and Buryatia. Mongolia and China may also become promising consumers, he added.

INK’s representative explained that INK’s Markovskoye, Yarakta and adjacent fields could be used as a resource base for the LNG plant. The timing of the preparation of a feasibility study and other details of the project were not specified by the company.

Ronald Smith, senior analyst at BCS World of Investments, notes that LNG production at small plants is more expensive than at large-tonnage ones. According to him, the cost of the project may be about $2000 per 1 ton of plant capacity, or about $200 million in total. rub. ($182–242 million at the current exchange rate of the Central Bank).

Ginzburg noted that in 2023 INK will complete the construction of a pipeline from the Markovskoye field to Ust-Kut with a length of 100 km with a capacity of up to 5.6 billion cubic meters. m per year. A company representative explained that the pipeline could be used to gasify the region. Also, according to Ginzburg, the possibility of building a methane pipeline between the Markovsky and Yarakta fields is being studied.

Since 2011, INK has been implementing a project to create a gas chemical cluster in the Irkutsk region with a hub in Ust-Kut. On June 13, the company launched a helium plant on the basis of the Yarakta field in the trial mode. Its capacity will be 10 million liters per year.

LNG production in Russia in 2022, according to Rosstat, increased by 8.1% and amounted to 32.5 million tons. The Energy Strategy of the Russian Federation until 2035 provides for an increase in LNG production to 100 million tons per year by 2030.

Now there are only two large-scale LNG projects operating in Russia – Yamal LNG (design capacity – 16.5 million tons per year) of Novatek and Sakhalin-2 (9.6 million tons), in which the controlling share belongs to ” Gazprom. Also, Novatek is implementing the medium-tonnage LNG project Cryogas-Vysotsk (660,000 tons), and Gazprom launched an LNG plant at the Portovaya compressor station (the beginning of the blown-up Nord Stream gas pipeline) with a capacity of 1.5 million tons per year. In addition, in Russia, according to Vygon Consulting, there are 18 small-scale LNG plants with a total capacity of 260,000 tons per year, and another 15 plants with a capacity of 378,000 tons per year under construction (Vedomosti wrote about this on April 13). 2023).

But according to the law “On Gas Export”, the owner of the unified gas supply system (“Gazprom”) and its subsidiaries, as well as private companies and their “subsidiaries”, which, as of January 1, 2013, were issued a license for the construction of LNG, have the right to export LNG – plants in subsoil areas, and production in these areas began after January 1, 2013 (Novatek belongs to this category), and state-owned companies operating on the shelf.

All other companies can export LNG, including from small-tonnage plants (with a capacity of up to 80,000 tons per year), only under agreements with Gazprom.

The State Duma is currently considering a draft law allowing the export of LNG from a number of Arctic fields (wholly or partially located north of 67 degrees north latitude). In mid-May 2023, it was adopted on first reading. Russian Deputy Energy Minister Anastasia Bondarenko explained in April that the bill would allow exporting LNG from 36 Rosneft fields.

In early June, Novatek’s chairman and co-owner, Leonid Mikhelson, said the company was proposing to amend the law on gas exports so that LNG exports could be granted to projects without reference to specific fields.

In March of this year, Russian Energy Minister Nikolai Shulginov announced that the Ministry of Energy and Gazprom would adjust the Eastern Gas Program to accelerate the gasification of Eastern Siberia and the Far East. He noted that “the most important task” is the creation of infrastructure for the gasification of the Krasnoyarsk Territory, the Irkutsk Region, the Trans-Baikal Territory and Buryatia.

Krylova points out that there is now demand for gas in Eastern Siberia as part of the gasification of this part of the country, but there is no necessary infrastructure. Sergey Grishunin, Managing Director of the NRA Rating Service, notes that LNG is ideal for gasification of settlements remote from the main pipeline and for the conversion of mining equipment to gas. With gasification due to LNG, capital expenditures are reduced, and mining equipment is switched to environmentally friendly fuel, the expert explains.

Smith believes that with such production volumes, the INK plant is likely to produce LNG for local consumption. These are deliveries either for small settlements where the construction of gas pipelines is unprofitable, or for large consumers of diesel fuel (enterprises or urban transport). According to Grishunin, it is profitable to supply LNG to replace fuel oil and diesel at a distance of 500-800 km from the plant.

Grishunin notes that there should be no technological problems during the construction of the plant. “Manufacturing facilities of this type are already operating in the north-west of the country. Most of the equipment for them is of Russian origin, and imported parts are mainly imported from China,” he explains.