Russia's largest gas independent Novatek has kicked off talks with potential international partners in a project aimed at commercialising reserves at two fields on the Yamal Peninsula in West Siberia by converting natural gas to ammonia and methanol.

Previously known as Obsky LNG, the project calls for the development of the Upper Tiuteyskoye and neighbouring West Seyakhinskoye fields, which together have estimated recoverable reserves of 200 billion cubic metres of gas.

Novatek has offered a minority stake in the project to Japan’s Mitsui, according to Moscow business daily Kommersant.

Mitsuit is already a partner in Novatek's second large liquefied national gas development, Arctic LNG 2, via its shareholding in the Japan Arctic LNG consortium.

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For Obsky LNG, Novatek had planned to use existing shipping and marine transportation facilities of its first LNG project on the Yamal Peninsula, known as Yamal LNG.

The port of Sabetta, together with an internationally certified airport, also fit with the amended plan to use reserves of the two fields to capitalise on the expected growth in demand for cleaner fuels, according to Novatek.

Ammonia instead of LNG

Under its revised plan, Novatek expects gas from Upper Tiuteyskoye and West Seyakhinskoye to be converted into hydrogen that will be used in ammonia production for easier transportation to global markets.

Speaking earlier this year, Novatek chairman Leonid Mikhelson said gas production from the two assets may eventually underpin annual production of 2.2 million tonnes of ammonia near Sabetta, as against 5 million tonnes of LNG it had previously planned.

Carbon dioxide, released in the gas-to-hydrogen conversion process, is planned to be captured and then pumped into underground storage to make the project compliant with low-emissions standards.

A major carbon, capture and storage project on the Yamal Peninsula is already under consideration, Novatek said earlier.

Novatek expects demand for ammonia as a source of hydrogen to initially come from Japan.

Kommersant quoted unidentified Novatek executives as saying that start-up of the first facility to produce ammonia is scheduled for 2026, with pre-front-end engineering and design studies ongoing.

Novatek has not commented on the Obsky ammonia project.

However, deputy chairman Mark Gyetvay said in a presentation to investors at the end of May that the company continues to expect stronger demand for natural gas and LNG as a transition fuel in the global push towards decarbonised energy.

He added that Novatek “continues the internal review of the two fields [Upper Tiuteyskoye and West Seyakhinskoye], and is preliminary targeting a final investment decision on moving forward with producing blue ammonia for 2022”.