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Russia's Comeback in LNG Race – Hungarian Economist

04.09.2017 18:06

In a little more than a month's time, Russia will formalize its claim for a bigger role in the ever-expanding global LNG market. Early October, when the Yamal LNG will see its commissioning and first cargo delivered, expect to hear "Russia" and "LNG" in the same sentence in increasing frequency. Yet in Yamal LNG, Russia’s bid to consolidate its claim as a gas stronghold and to garner at least 10 percent of the global LNG market, one can discern a quite unconventional project for Russia. Although led by NOVATEK, a non-state-owned company (albeit with multiple connections to the political establishment) and not the usual "suspect" Gazprom, it stands a good chance to propel Russia into the LNG vanguard.

Yet NOVATEK will not stop after Yamal LNG had been commissioned, the company intends to become the world’s largest LNG exporter in 10 years' time. This May, the company has already concluded an agreement with Linde and Technip on designing NOVATEK's next top project, Arctic LNG-2 (the platforms will be built by Saipem). Arctic LNG-2, located nearby Yamal LNG, right across the Ob Bay on the Gydan Peninsula, will be fed from NOVATEK's Salmanovskoye and Geofizicheskoye fields (total estimated and potential reserves of 1,2 TCm). Moreover, just to prove that NOVATEK is genuinely intent on establishing the Gydan Peninsula as one of Russia's leading gas hubs, it secured late August three new licences – the Verkhnetiuteyskoye, Zapadno-Seyakhinskoye and Shtormovoye fields – which combined boast estimated and potential reserves of 1.37 TCm.

According to Viktor Katona, a Group Physical Trader at MOL Group, if institutional conditions remain unchanged, both Yamal LNG and Arctic LNG-2 will be profitable above the $6-7/MMbtu level. Now that Gazprom is making headway with Baltic LNG, Russia's LNG prospects are a far cry from being as dim as ten years ago, the expert resumed.