Novatek has underlined its commitment to a pilot project to produce blue ammonia and hydrogen using natural gas from West Siberia's Yamal Peninsula, buoyed by soaring revenues.

First deputy executive board chairman Lev Fedosyev told a conference call this week that the Russian company is reviewing design studies for the proposed Obsky Gas Chemistry Complex (Obsky GCC) and stepping up analysis of the economics and logistics.

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Although the pre-front end engineering design study is scheduled to be completed in the first half of next year, Novatek has already set out some basic parameters.

At the first stage, it will produce more than 2 million tonnes of ammonia and about 120,000 tonnes of hydrogen per year.

More than 4 million tonnes of carbon dioxide per year, or more than 90% of CO2 produced, will be captured and injected into three geological formations for long-term storage.

Novatek is also engaged in geological surveys to study potential reservoirs at licensed sites on the Yamal Peninsula for additional CO2 injection and storage, according to Fedosyev.

Such reservoirs will serve the Obsky GCC and Novatek’s neighbouring development, Yamal LNG, to reduce their carbon footprint from operations.

Novatek is studying the potential for wind farms in the Yamal Peninsula region to reduce the carbon footprint further, Fedosyev said.

He also highlighted steps by Russian authorities to create a regulatory framework for carbon capture and storage projects, including the right to pump CO2 into underground reservoirs, licensing, monitoring of storage facilities and verification of emissions.

To tackle its other greenhouse emissions, Novatek has signed an agreement with Paris-based Kayrros for a joint pilot to improve tracking, detecting, monitoring and measuring of methane emissions at its gas fields in West Siberia.

Oil and gas investments on the up

Improving market fundamentals have underpinned Novatek’s investments in liquefied natural gas projects, and renewed exploration.

According to Novatek, its next large LNG project, Arctic LNG 2, has reached 52% completion by the end of September against 45% at the end of June.

The company spent 12.3 billion rubles ($174 million) of capital investments on moving forward with this development between July and September this year. The first train is due to come online in 2023.

However, Novatek also invested close to 20.8 billion rubles in exploration and development drilling and infrastructure development at 14 gas fields and blocks under its control in West Siberia in the third quarter.

The goal is to build up reserves for a third LNG project, Arctic LNG 1, and reverse decline at gas fields that supply domestic customers.

Third-quarter revenues came in at 277 billion rubles against 164 billion rubles a year earlier.

Net income rose to 113 billion rubles from 13 billion rubles in the same period of 2020.

For the first nine months of the year, Novatek reported revenues of 771 billion rubles and net income of 277 billion rubles against a top line of 484 billion rubles and bottom line of 24 billion rubles in 2020.