Novatek subsidiary Arctic LNG 1 has won an exploration and development licence for a large block on the Gydan Peninsula in northern Russia's remote Yamal-Nenets region.

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According to the Russian Natural Resources & Environment Ministry, the subsidiary paid 775 million roubles ($10.2 million) for the North Gydansky block, just 70 million roubles over the starting price in the auction.

The block is a key asset in Russian gas independent giant Novatek’s ongoing efforts to increase operated gas reserves on the Gydan Peninsula.

The company has yet to determine the capacity and assets to be allocated to its next liquefied natural gas projects on Gydan, Arctic LNG 1 and Arctic LNG 3.

These will come online after Novatek commissions its first LNG development on the Peninsula — known as Arctic LNG 2 — between 2023 and 2026.

Easy win

The North Gydansky block occupies around 6500 square kilometres and includes acreage both onshore and offshore in Gydan Bay.

The block was partially explored in the early 1980s, with one dry well drilled and three potential structures identified for further drilling.

Based on its similarities to other explored acreage in the region, authorities have estimated its possible in-place resources at 1.2 trillion cubic metres of gas and about 1.5 billion barrels of oil and condensate.

Answering an earlier request from Novatek, the ministry restricted participation in the auction, in essence opening the tender only to the gas producer and its wholly owned subsidiaries.

Opportunities for Linde

Industry analysts in Moscow expect Novatek to continue to design its planned large-capacity LNG projects on the liquefaction process and technical solutions provided by Germany’s industrial gas and engineering company Linde, its long-term partner.

Linde has for years worked on various projects in Russia with Novatek and state-controlled gas monopoly Gazprom.

Last week, Gazprom said a subsidiary of the German company, Linde Engineering, had signed a pact with Ruskhimalliance, operator of a large gas processing, LNG and polymer facility that is planned to be built near the Baltic Sea port of Ust-Luga.

The protocol calls for the two companies to negotiate an engineering, procurement and site services contract for the gas processing plant that will separate ethane from the incoming gas mixture. Ethane will be then used at a separate facility to produce polymers.

As well as these two facilities, the project also calls for the construction of an LNG plant in Ust-Luga with annual capacity of 13 million tonnes.

Gazprom holds a 50% share in Ruskhimalliance, with the remaining interest in hands of Russian privately held player Rusgazdobycha.