Novatek is sticking to its schedules at major liquefied natural gas and other producing projects in Russia despite the slump in energy prices and economic downturn caused by the Covid-19 pandemic.

Speaking at the end of the last week in Moscow, deputy chairman Mark Gyetvay said the company has historically operated “on the low end of the cost spectrum” and thus has the ability to remain solvent and to generate positive cash flows even in a weak price environment.

Gyetvay revealed that the Novatek-led Yamal LNG plant near the port of Sabetta on the Yamal Peninsula operated at 122%, above the nameplate annual capacity of 16.5 million tonnes, in the first quarter.

He added that there are no plans to reduce output at the plant later this year, as it will deliver a larger share of LNG to customers under long-term contracts with price formula mechanisms that decrease price volatility and protect buyers and the seller with price ceilings and floors.

“We are starting to see curtailments from higher-cost LNG projects around the world, but Yamal LNG is not one of them," Gyetvay said.

Fourth train in view

He added that Yamal LNG still expects to start up its fourth train before the end of this year, adding over 900,000 tonnes per annum of LNG production to the nameplate capacity of the project.

Overall progress at Train 4 was upped to 79% against 73% at the beginning of February.

He did not comment on reports of rising tensions between builders of the fourth train and their employer, Russian building contractor Velesstroy, over the shortage of Covid-19 testing kits and personal protective equipment after dozens of shift workers in Sabetta tested positive for the novel coronavirus in April.

In videos posted online, workers have been seen demanding urgent evacuation from Sabetta and have refused to agree to being isolated in crowded onsite dormitories.

On last week’s conference call with investors, Gyetvay shrugged off suggestions that the start up of its next major LNG project, Arctic LNG 2 on the Gydan Peninsula, may be delayed from its current planned start-up of 2023 for the first train.

In April, a Covid-19 outbreak was reported at the Kola Yard near the Russian port of Murmansk, which is set to build concrete gravity-base (GBS) platforms and other modules for the three LNG trains of Arctic LNG 2.

Gyetvay said that the outbreak is confined to the Velesstroy camp that is “located separately at a significant distance from other contractors’ living and working camps".

He added: "Velesstroy’s employees do not cross paths with other contractors’ workers."

Arctic LNG 2 on schedule

“It is very important that Arctic LNG 2 is being realised [on schedule] despite massive delays and cancellations of global LNG projects as these other projects were initially scheduled to commence commercial production at roughly the same time as Arctic LNG 2," he said.

“We see no major delays in Arctic LNG 2 marketing efforts although the current market environment is more competitive, and the inability to have direct meetings [with buyers] complicates these discussions”, Gyetvay acknowledged.

Work is also progressing fast at the Utrenneye gas and condensate field that will provide feedstock gas to Arctic LNG 2, and a nearby marine terminal where the operator started installing anchor rods for the first GBS platform, according Gyetvay.

Obsky LNG plans

Gyetvay said that Novatek may later consider a decision to delay the final investment decision on the Obsky LNG project by one year to 2024 as “it reviews various financing options”.

He added that the final decision on whether to push back this project is expected in the third quarter of this year.

Located close to Yamal LNG, Obsky LNG is expected to produce about 5 million tpa of LNG and will use existing loading facilities in the port of Sabetta.

LNG

Novatek sticks to LNG project plans despite downturn