Germany’s commodity trader RWE Supply & Trading (S&T) has become the first international company to reach a preliminary agreement with Moscow-based independent Novatek to back its fast progressing plan to produce ammonia and hydrogen on Russia's Yamal Peninsula .

A memorandum of understanding signed by both companies this week envisages the supply of yet to be produced low-carbon ammonia and hydrogen by Novatek to RWE.

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Novatek is currently conducting a pre-front end engineering design study for a blue ammonia and hydrogen project on the Yamal peninsula, know as Obsky Gas Chemical Complex.

In the first phase, Novatek is targeting production of about two million tons of ammonia and about 120,000 tonnes of hydrogen from natural gas per year, with more than 90% of scope 1 and 2 emissions to be captured and stored underground.

RWE S&T said that it expects ammonia and hydrogen to be delivered from the Yamal Peninsula to its customers in Germany and other European markets.

LNG aspect

The German trader said it hopes cooperation with Novatek will open more short-term opportunities for the company to buy spot liquefied natural gas cargoes from Yamal LNG, the Novatek-led development on the Yamal Peninsula.

Novatek is expected to have 3.5 million-4.7 million tonnes of LNG per year available on the spot basis from Yamal LNG where the company holds a 60% stake.

In addition, the trader expects to be able to negotiate long term LNG purchase contracts from another Novatek-led development in the Russian Arctic region – Arctic LNG 2 – and other company’s LNG projects in the same region, according to Novatek.

The trader’s parent company, RWE, is currently operating the second-largest gas-fired power station fleet in Europe via its subsidiary RWE Generation.

RWE Green Conversion

The company said it is working on a roadmap for its existing gas-fired power stations to permit a gradual transition to using more hydrogen and thus reducing the burning of natural gas.

RWE said earlier that it aims to invest about €50 billion ($56.5 billion) through to 2030 to grow its green and flexible generation portfolio.

The company expects hydrogen and flexible generation to provide a combined 20 gigawatts of power by that year out of total anticipated generation capacity of over 55 GW, according to a company’s recent presentation to investors.

In November, RWE Generation signed a memo of understanding with Britain’s Shell New Energies as both companies consider options for teaming up in green hydrogen and other decarbonisation projects in the UK, Germany and the Netherlands.