NOVATEK does not intend to buy gas from Gazprom for Murmansk LNG

NOVATEK is ready to implement the Murmansk LNG construction project on the resource base of fields in the south of the Gydan Peninsula. According to Kommersant’s estimates, we are talking about the Geophysical field, for which the company, back in 2017, admitted the possibility of sending gas to the Unified Gas Supply System (UGSS). Thus, NOVATEK does not intend to buy gas from Gazprom for the project. But the company still needs to get permission from the monopoly to connect its projects to the UGSS, as well as achieve a change in the law on gas exports.

NOVATEK’s promising Murmansk LNG project will be supplied with gas from its own resource base in the south of the Gydan Peninsula, NOVATEK CEO Leonid Mikhelson told reporters. Thus, the company is not going to buy Gazprom’s gas.

NOVATEK is exploring the possibility of building a new large-tonnage LNG project in the Murmansk region, consisting of three liquefaction lines with a capacity of 6.8 million tons each. The first two lines of Murmansk LNG can be launched at the end of 2027, the third – at the end of 2029.

Mr. Mikhelson also admitted that the project could be partially supplied from the company’s already operating fields. “Today we are producing 80 billion cubic meters of gas. One line of “Murmansk LNG” needs 11 billion. Based on the existing raw material base, we can maintain a shelf until 2040, excluding the Gydan fields. Therefore, we can raise production to the volumes necessary for Murmansk LNG. In 5–7 years, we will connect new fields, while the shelf for supplies to the domestic market of Russia will remain the same,” he said (quoted by TASS).

The largest field in the south of Gydan is Geofizicheskoe (proved reserves according to SEC – 1.287 billion boe). The company’s 2017 strategy states that gas from the field can be sent both to the Unified Gas Supply System and to LNG production on site. Sergei Kondratiev from the Institute of Energy and Finance recalls that the Geophysical field was previously assigned to the Arctic LNG-1 project. In his opinion, in order to provide Murmansk LNG with gas, NOVATEK will have to collect a “pool” of fields, which may include areas on the Yamal Peninsula and the southern coast of the Gulf of Ob.

The fact that NOVATEK is going to liquefy its gas reduces the number of issues that the company needs to negotiate with Gazprom in order to sell Murmansk LNG. However, NOVATEK needs to obtain permission from Gazprom to connect the Gydan fields and the Volkhov-Murmansk gas pipeline to the UGSS. In addition, the status of the last gas pipeline is not entirely clear, given that NOVATEK is going to build it itself – meanwhile, according to the law, only Gazprom can own gas pipelines connected to the UGSS.

Finally, Murmansk LNG does not have the right to export gas, although formally the license for the Geophysical field provides for the direction of gas for liquefaction. Leonid Mikhelson said that the law needs to be changed. “We now have all projects (for the production of LNG.— “b”) on one legal entity: production, liquefaction and sale. And here there will be production on one, transportation on the second, liquefaction and export on the third,” Mr. Mikhelson added.

He explained that the main reason why NOVATEK decided to do an LNG project in Murmansk, and not build a plant on Gydan, was the presence in the first case of an ice-free port and free power capacities (the Murmansk energy system is surplus and belongs to semi-closed ones).

The ice-free port will allow the company to do without ice-class LNG tankers, which are currently difficult to order due to sanctions. “Now there is a question about new ice-class tankers. We estimated how much we can transport with LNG carriers (ice class.— “b”) Arc7 from projects located in the Gulf of Ob. We came to the conclusion that in order to supply LNG to the Asia-Pacific region, Arc7 should be sent to the transshipment complex in Kamchatka, and the next project should be done in the Murmansk region, where there is an ice-free port,” said the head of NOVATEK. According to him, the lines have been switched to electric drives, each requiring 500 MW – “a huge power plant.” But in the region, Mr. Mikhelson specified, there is a very large surplus of electricity, more than 1 GW, so “everyone wins.”

Tatyana Dyatel