Gazprom has kicked off the first major tenders for modifications to a gas pipeline network that is seen as a crucial step towards getting a planned huge liquefied natural gas development in the Baltic Sea up and running.

The tenders are for the supply of supporting equipment, power and communication solutions and services under a plan to modify the configuration of the gas pipeline network in West Siberia and in the north-west of the country.

Since the beginning of February, Gazprom’s procurement subsidiary Gazprom Komplektasiya has placed notices for over 20 tenders, worth a combined 17.4 billion roubles ($235 million), that are linked to the plan.

The supply of the equipment and solutions is seen as a precursor to proceed with a multibillion-dollar initiative, revealed in 2019, to build a liquefied natural gas plant and a polymer facility near the Baltic port of Ust-Luga.

The goal of the project is to assign parts of the trunk network to carry a separate stream of gas with higher content of ethane via the existing system to Ust-Luga.

It will include upgrades to gas-pumping compressors and the laying of new pipelines along the over-2000 kilometre route from West Siberia to Ust-Luga.

The ethane-rich gas mixture will be sourced from deeper Valazhin and Achimov formations located below shallow Senoman reservoirs at existing Gazprom-operated blocks in the Yamal-Nenets region, its core region of operations.

In Ust-Luga, the separate gas stream will be processed to extract ethane, which will serve as feedstock for the polymer facility to be built and operated by Ruskhimalliance, a Gazprom joint venture with Russian privately held player Rusgazdobycha.

Ruskhimalliance will also construct and operate a two-train LNG plant in Ust-Luga.

Gazprom must also upgrade the throughput capacity of its pipeline network in the north-west of Russia to be capable of delivering 45 billion cubic metres of gas per annum to the venture.

In June last year, Gazprom signed a 20-year gas supply agreement with Ruskhimalliance for this volume of gas in expectation that the venture will start production of polymers in 2024, followed later by LNG production.

Sudden rival proposal

However, the Ust-Luga polymer project has the threat of rivalry from Russia's largest independent gas producer, Novatek.

Novatek is already a majority shareholder in the Yamal LNG project on the Yamal Peninsula and is working to bring on line two other large LNG facilities in the region – Arctic LNG 2 and Obsky LNG.

Speaking on Tuesday in Moscow, Novatek chairman Leonid Mikhelson said that the company is prepared to consider an upgrade to Arctic LNG 2 to extract ethane from the incoming gas mixture for conversion into polymers.

According to Mikhelson, gas polymer facilities could be placed next to LNG plants on the Yamal and Gydan Peninsulas to reduce spending on transportation of feedstock gas.

Mikhelson is thought to be reacting to an initiative from Russian Deputy Prime Minister Alexander Novak who proposed the construction of a major polymers and chemical cluster on the Yamal Peninsula during his meeting with President Vladimir Putin in December.

LNG

Gazprom hatches major tenders for pipeline work linked to planned Baltic Sea LNG project