Novatek postponed the project for the production of ammonia and hydrogen Ob GCC

“Novatek” has suspended consideration of the project of the Ob Gas Chemical Complex (“Obskoye GCC”), Leonid Mikhelson, Chairman of the Board, co-owner of the company, said at the EEF-2022 on September 7. An investment decision is expected in mid-2023, Mikhelson added.

“We have almost passed the pre-FEED stage (pre-project work. – Vedomosti). We understand it, but in connection with the sanctions, we have weighed it for now, we are not making a decision,” he said (quoted by Interfax).

Obsky GCC is Novatek’s project to produce 2.2 million tons of ammonia and 130,000 tons of hydrogen per year from natural gas. The project included the Verkhnetiuteyskoye and Zapadno-Seyakhinskoye fields in Yamal, then the Neytinskoye and Arkticheskoye fields were added to them. The launch of the first line of the plant was scheduled for 2026, the second line – for 2027. Now the design studies are underway on the project, and the final investment decision was planned to be made in 2022. It was planned to build a gas liquefaction plant in a single complex with the Obsky GCC ” Ob LNG.

At Obskoye LNG, it was originally planned to build three production lines with a capacity of 1.6 million tons of LNG each based on Novatek’s own liquefaction technology, called the Arctic Cascade. In May 2019, the general director of the enterprise, Vladimir Khurtin, stated that “Novatek» expects to start production of LNG at the first line of the plant in the fourth quarter of 2022. The second and third stages were supposed to be launched in the second and third quarters of 2023, respectively.

In February 2022, it became known that the project could be implemented using the Arctic LNG 2 technology (Novatek’s second LNG project after Yamal LNG) after problems with equipment on the fourth line of Yamal LNG, which was also created technology “Arctic cascade”. But in June, Mikhelson announced that the company decided to start design work on two lines of the Ob LNG with a capacity of 2.5 million tons of LNG per year using the Arctic Cascade technology.

Speaking about the company’s other Yamal projects, Mikhelson said at the WEF-2022 that the first stage of the Arctic LNG 2 plant will be launched in December 2023, the second stage is expected to be launched in 2024, the third – in 2026. That is, a company with spring 2022 did not change the timing of the project. According to Michelson,Novatek» has already received the main equipment for all three phases of the plant, except for gas turbines. In mid-June, Kommersant reported that the American Baker Hughes refused to supply turbines for the project, both for gas liquefaction and for power supply.

Mikhelson added that by the end of 2024 the project will need 6-7 gas carriers. The head of Novatek specified that the Russian NIPIGaz would become the EPC contractor for Arctic LNG 2, while the British Technip Energies was pulling out of the project (Arno Piton, CEO of Technip Energies, spoke about the company’s difficulties due to sanctions in April). The NIPIGaz website states that the company acted as an EPC contractor as part of a joint venture with TechnipFMC and Saipem.

Mikhelson also added that the French TotalEnergies decided to stay in the Arctic LNG 2 and Yamal LNG projects.

The head of Novatek said that liquefied gas from the Yamal LNG plant, which was previously supplied by Gazprom-owned GM & T Singapore, is now sold to Novatek itself and on the spot market.

GM&T Singapore was an LNG trader for Gazprom’s German subsidiary Gazprom Germania. In April of this year, the German authorities transferred the holding to the control of the country’s Federal Network Agency. In response, the Russian government imposed blocking sanctions on the structures of the German holding, including GM&T. And at the end of August, the permission of the Russian Federation to continue shipments of GM & T Singapore expired, and it was not renewed.

Igor Yushkov, a leading analyst at the National Energy Security Fund, believes that under the current conditions, the Ob GCC project is technically difficult to implement, since the supply of equipment for it from abroad fell under sanctions (the EU banned the supply of gas liquefaction equipment to Russia. – Vedomosti “). According to the analyst,Novatek» may return to the idea of ​​the GCC project if sanctions are eased, but may create it on the basis of larger deposits. Finam analyst Alexei Kalachev also believes that in the face of growing demand for LNG and ammonia, “Novatek” is unlikely to finally abandon the sale of the Obsky GCC and Obsky LNG, but it can“ freeze them until better times.

Yushkov considers the Obskoye LNG project to be “more feasible” than the GCC. The analyst noted that “Novatek” will be able to make good money on such a project if it can launch it in 3-4 years and get into the “window of opportunity” due to the continuing shortage of LNG in the world market. “”Novatek“Just going back to a more real idea in the form of LNG,” the analyst concluded.

Experts also draw attention to the fact that due to Western sanctions, Novatek’s Yamal projects may have problems with the repair and replacement of equipment. But they do not see any problems with the markets for Russian LNG. Yushkov said that Yamal LNG is now successfully supplying products to Europe and is one of the largest suppliers to Spain. Kalachev added that Yamal LNG was initially focused on the markets of Southeast Asia. The share of Asia in the company’s sales, he said, will grow as the infrastructure of the Northern Sea Route develops.

According to the International LNG Importers Group (GIIGNL), in 2021, the Russian Federation exported 29.6 million tons of LNG, ranking 4th after Australia (78.5 million tons), Qatar (77 million tons) and the United States (67 million t). Russia accounted for just under 8% of global LNG exports in 2021.

Two large LNG projects are currently operating in the Russian Federation:Sakhalin-2» Gazprom and Yamal LNG Novatek.

The main buyers of gas from Yamal LNG, according to GIIGNL, in 2021 were French TotalEnergies (4 million tons), Chinese CNPC (3 million tons) and GM&T (2.9 million tons). Also, 2.5 million tons annually are bought byNovatekand the Spanish Naturgy Energy Group. In 2021, all LNG volumes were contracted with Arctic LNG 2, while most of them – 11.2 million tons per year – were taken by myself “Novatek”, follows from the report.

There are no data on Obskoye LNG in the GIIGNL report. According to Alexander Frolov, deputy director of the National Energy Institute, this means that there are no long-term contracts signed within the project. According to him, the transfer of Ob LNG will not be a serious problem for the global market due to relatively small volumes. “In addition, in 2022 there was a general decrease in demand for gas in the global market, which alleviates the overall supply shortage,” Frolov said.

At the same time, the analyst emphasized that the transfer of the Ob projects would not affect the already operating Yamal LNG, about 22 billion cubic meters. m of LNG per year (15.9 million tons), from which it enters the scarce European market.