Russia’s largest independent gas producer Novatek has decided to change the focus of its first blue ammonia and hydrogen project to liquefied natural gas.

Speaking on the sidelines of the Russian Energy Week conference in Moscow earlier this week, Novatek executive chairman Leonid Mikhelson said that the Obsky Gas Chemistry Complex (GCC) development on West Siberia’s Yamal Peninsula will aim to produce 5 million tonnes per annum of LNG.

The volumes are expected to be exported to international markets via the port of Sabetta on the Yamal Peninsula, which also services country’s largest LNG project, Yamal LNG, in which Novatek holds a controlling stake.

Mikhelson told reporters on Thursday that the investment decision on the Obsky LNG scheme is expected in the first half of 2023, and added that the project will be based on a Russian liquefaction process and use Russian-manufactured equipment and machinery.

He said the current proposals for the plant include two,2.5 million tonnes per annum capacity liquefaction trains to commercialise gas output from the Upper Tiuteyskoye and West Seyakhinskoye fields.

Novatek has already pioneered its own liquefaction process, Arctic Cascade, which is based on the low ambient outside temperate of Russia’s Arctic regions and Russian-manufactured compressors that have a limited power output when compared to more powerful and larger Western-built units.

The company is understood to have almost completed a pre-front-end engineering and design study on the Obsky GCC project, which called for gas to be extracted from the two deposits and converted into 2.2 million tpa of blue ammonia and some 130,000 tpa of hydrogen.

The ammonia and hydrogen would be exported, while the carbon dioxide would be be stored underground.

However, industry analysts have warned that international sanctions against Russia following the country’s invasion in Ukraine in February, may curtail Novatek’s ability to import the required production equipment and contract specialised Western contractors to build processing facilities.

LNG preference

During the event in Moscow, Mikhelson reiterated that LNG remains a significantly more cost effective way for Russian gas to be delivered and sold to international markets, with current transportation costs between Sabetta and customers in China estimated at about $70 per thousand cubic metres.

Deliveries of LNG from the Yamal Peninsula to Europe are almost half the price of transporting volumes from the same location via trunklines across Russia and transit countries to the continent, he added.

Mikhelson said that Yamal LNG, where four trains are in service, is expected to hit a record high production of 21 million tonnes for the whole of 2022, up from 19.6 million tonnes last year.

Despite the proposed switch away from blue ammonia at Obsky, Novatek has not confirmed that it is dropping efforts to reduce the CO2 footprint from its operations.

Earlier this week, the company signed a memorandum of understanding with Russian nuclear conglomerate Rosatom to investigate a potential decarbonisation partnership.

Novatek said the partners will initially look at an option for its condensate processing and export facility on the Russian Baltic Sea port of Ust-Luga to buy electric power from Rosatom’s planned wind farms.

During the event in Moscow, Russian President Vladimir Putin and executives from some of the company’s leading corporations have reiterated their criticism of international efforts to transition to renewable and low-carbon energy sources, and away from easily available fossil fuels.