Russian gas independent Novatek has edged closer to building a new liquefied natural gas facility in the country’s far east after authorities agreed to partially bankroll its plan to build an LNG transshipment facility in the region.

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The plan —which was preliminarily approved in August — calls for the gas producer to install and operate a floating storage and regasification unit near the regional capital, Petropavlovsk-Kamchatsky.

The FSRU will be capable of providing up to 500 million cubic metres per annum of gas to the city, thus fully removing the need for local authorities to import fuel oil and diesel that are commonly used to generate electricity and for residential heating.

Petropavlovsk-Kamchatsky has a population of about 180,000 people, hosting 85% of total residents of the whole Kamchatka region.

At a recent meeting with regional Governor Vladimir Solodov, Novatek chairman Leonid Mikhelson said the FSRU may be operational in 2023 or 2024.

Huge LNG plans

The proposed LNG transshipment terminal that will be located in Bechevinskaya Bay, some 140 kilometres from the region’s capital. It will move over 20 million tonnes per annum of LNG from Novatek’s expensive Arc7 Arctic-class carriers to ordinary vessels for onward delivery to Japan, China and other countries in Asia.

While Novatek has ordered new carriers of this class — capable of moving independently in mild ice conditions, in Russia and Korea — the producer is still expected to have an insufficient number of vessels to deliver LNG to end-customers from its major upcoming LNG projects, Arctic LNG 2, Obsky LNG and Arctic LNG 1.

To solve the issue, Novatek has proposed to build two LNG transshipment terminals, one on Kamchatka and another one near the Barents port of Murmansk, to shorten voyage times for the Arc7 carriers.

Earlier this year, Prime Minister Mikhail Mishustin ordered the government to spend up to 12.3 billion roubles ($160 million) in dredging a 6.5 kilometre navigation channel and creating other supporting infrastructure for Novatek’s terminal.

Novatek was immediately available for comment on the estimated investment total for the FSRU and whether it will need some state backing for the project.