NOVATEK and Gazprom, through the mediation of the President, agreed on a scheme for the construction of a gas pipeline to Murmansk
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NOVATEK and Gazprom, through the mediation of the President of the Russian Federation, managed to agree on a scheme for the construction of a large gas pipeline to NOVATEK’s promising Murmansk LNG project. According to the agreement, the main pipeline with a length of 1.3 thousand km and a capacity of 40 billion cubic meters per year, taking into account the needs for gasification of Karelia and the Murmansk region, will be built by NOVATEK. As Kommersant found out, NOVATEK will then sell the gas pipeline to Gazprom in installments and at the same time will pay it the tariff for gas transportation. This will allow the project to be implemented without Gazprom’s investment and without breaking the company’s monopoly on the ownership of main gas pipelines. According to analysts, construction of the pipeline will cost at least 400 billion rubles. and can take up to four years.
The head of NOVATEK, Leonid Mikhelson, announced on October 11 that the Volkhov-Murmansk gas pipeline, which will supply the Murmansk LNG plant, as well as the regions where the pipeline passes, will be built by NOVATEK. According to him, taking into account the gasification of Karelia and the Murmansk region, it was decided to increase the capacity of the future pipe from 30 billion to 40 billion cubic meters.
“For Murmansk LNG, the gas pipeline capacity is 30 billion cubic meters. The government decision was to reconsider this decision. We have revised it, and it will be built with a capacity of 40 billion cubic meters, which will satisfy all the gas supply needs of both the north of Karelia and the Murmansk region,” said Mr. Mikhelson (quoted from “Interfax”).
As President Vladimir Putin later explained, up to 10 billion cubic meters will be used for gasification of the regions: “The pipeline will be laid for the LNG production project on the Kola Peninsula, but part of its capacity, namely 10 billion cubic meters per year, will be used to supply enterprises and social facilities, residential buildings in Karelia and the Murmansk region, for the development of environmentally friendly power generation.”
According to Kommersant, after completion of construction, the gas pipeline will be sold to Gazprom in installments, while NOVATEK will pay the tariff for pumping gas.
As Kommersant’s interlocutors note, the government-approved scheme allows not to burden Gazprom’s investment program, and also preserves its monopoly on the ownership of main gas pipelines (part of the Unified Gas Supply System, UGSS), established by the gas supply law.
NOVATEK and Gazprom did not respond to Kommersant’s request. In particular, the companies did not explain what the installment period would be, the expected time frame for putting the gas pipeline into operation and the expected cost of construction. Leonid Mikhelson previously estimated the length of the Volkhov-Murmansk gas pipeline at 1.3 thousand km. He also said that “we need to start building it tomorrow so that it will be there in 2027.”
NOVATEK is exploring the possibility of building a new large-scale LNG project in the Murmansk region, consisting of three liquefaction trains with a capacity of 6.8 million tons. The first two of them are planned to be launched at the end of 2027, the third at the end of 2029. Murmansk LNG will be supplied with gas from NOVATEK’s own fields in the south of the Gydan Peninsula. To launch two stages of the LNG plant in 2027, NOVATEK will need at least 22 billion cubic meters of gas, not counting the volumes that could be used for gasification of the regions.
To implement the project to NOVATEK required negotiate with Gazprom on permission to connect the Volkhov-Murmansk gas pipeline to the UGSS. NOVATEK also needed to obtain the right to export LNG from the new plant. As the head of the Ministry of Energy Nikolai Shulginov reported in the State Duma on October 9, the president gave instructions to make legislative decisions on the access of the Murmansk LNG project to export.
The proposed gas pipeline construction scheme may become quite common given Gazprom’s limited financial resources, believes Sergei Kondratyev from the Institute of Energy and Finance. “Before this, such mechanisms were practiced in the electric grid industry: construction of substations by an investor with subsequent commissioning or sale of TSOs. But this was not used in the construction of gas pipelines in the UGSS zone,” he notes.
According to Sergei Kondratyev, the cost of construction will exceed 400 billion rubles. He recalls that in 2022, the authorities of the Murmansk region estimated the project at 350 billion rubles, while a much lower capacity was assumed. The expert also cites as an example the cost of the Gazprom Ukhta-Torzhok-2 gas pipeline (973 km, capacity 45 billion cubic meters), which at current prices is about 300 million rubles. for 1 km. “It is quite possible that NOVATEK will be able to build a gas pipeline cheaper due to strict control over contractors and obtaining discounts from suppliers,” he believes.
Sergei Kondratyev believes that “laying even at an accelerated pace will take at least two years,” and NOVATEK will have to solve the problem with equipment for compressor stations, given the current shortage of domestic medium-power gas turbines.
Based on the stated parameters, the cost of building a gas pipeline with compression stations could cost about 800 billion rubles, says Evgenia Popova, a consultant for the Implementa company. According to her estimates, the investment tariff for pumping will be about 2 thousand rubles. for 1 thousand cubic meters (150 rubles per 100 km), and the construction of the pipe will take at least four years.
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