Russia's largest independent gas producer Novatek is exploring options for the proposed Obsky liquefied natural gas project that could include using some of the gas to produce ammonia and hydrogen for export.

Speaking during a conference call last week in Moscow, Novatek deputy executive board member Mark Gyetvay acknowledged that the company “spent a significant amount of money on developing the future resource base at our two fields, supporting the Obsky LNG project”.

The Upper Tiuteyskoye and West Seyakhinskoye fields, which will provide gas to the planned LNG plant, "are already at advanced [development] stages”, Gyetvay said.

The company is “looking presently at different opportunities to monetise their resource base, particularly at a gas chemistry project at Sabetta to produce blue ammonia”, he said.

Together with foreign partners, Novatek operates the Yamal LNG project at the port of Sabetta in West Siberia.

Ammonia in sight

“We may internally decide to move forward with this project [later] in 2021 with a potential final investment decision in 2022,” Gyetvay said.

"Such project will allow us to develop an ammonia and hydrogen export-oriented project on the Yamal Peninsula to produce low-carbon energy.”

Novatek’s preliminary estimates show that by using ammonia as a medium to hold hydrogen, the company "can actually transport hydrogen more effectively to the marketplace", he said, citing Japan as one potential buyer.

“But there are things like the carbon capture and storage that we have to look at first,” Gyetvay added.

Novatek is “continuing exploration work to assess reservoirs to inject and store carbon dioxide at Yamal LNG, Arctic LNG and future LNG projects in the Yamal and Gydan peninsulas”, he said, without expanding on what the company has said previously about its potential CCS plans.

Strategy revision

Gyetvay said the company is updating its long-term development strategy to reflect the global push to reduce carbon dioxide emissions.

“We have to now incorporate into the strategic discussions such types of projects as carbon capture and storage, reforestation — which is a nature-based carbon solution — ammonia and hydrogen,” he said.

“But they are not types of projects that we can make a rush decision or jump into something that we do not fully understand yet, and that means we need to do some studies. We don't have the infrastructure in place yet to deliver hydrogen.”

Obsky LNG was initially expected on stream in 2023, producing up to 5 million tonnes per annum of LNG and using Yamal LNG export facilities in Sabetta to export cargoes to international markets.

However, the project has been pushed back to 2025 or even later after Novatek was reported to have had difficulties implementing its patented gas liquefaction process, Arctic Cascade, using Russian-made compressors.

Novatek has not commented on the reports.

Chukotka setback

Novatek's efforts to provide LNG for power generation at a domestic copper mine are in question after Russia's President Vladimir Putin reportedly approved a competing proposal from Russian state nuclear power corporation Rosatom.

The proposed floating nuclear power station would be dedicated to generating electricity for one of world’s largest untapped copper mining fields, Baimskaya, on the remote Chukotka Peninsula in eastern Russia.

As an alternative, Novatek has proposed a floating LNG power plant near the Chukotka shore for an estimated cost of 82 billion roubles ($1.1 billion).

Moscow business daily RBK quoted a March letter from Rosatom advisory board chairman Sergey Kiriyenko assessing the cost of the facility at 169 billion rubles, with the final tariff about 2% higher than Novatek’s plan.

Rosatom already operates a country's first floating nuclear power plant on Chukotka, which came into operation at the end of 2019 to supply electricity to the city of Pevek and neighbouring regions.