Russian authorities are considering increasing the country’s liquefied natural gas exports to help counter the expected loss of supplies to Europe via onshore and offshore pipelines.
The plans reportedly involve tighter government control over the development of gas resources, reversing the trend from recent years in which licences were awarded to gas giant Gazprom, leaving the government with no direct stakes in major gas assets.
Moscow business daily Kommersant cited a recent request from Deputy Prime Minister Alexander Novak for the Natural Resources Ministry, Subsurface agency Rosnedra and the Economic Development Ministry to speed up the process in which unexplored or undeveloped assets held by state controlled Gazprom and other companies can be returned to government control.
The government aims to auction any returned assets to operators that can ensure faster development of the acreage.
Novak’s request, a copy of which was obtained by Kommersant, also calls for the ministries to pay particular attention to the pace of exploration and development at prolific gas blocks on the Yamal Peninsula.
The northeast of the peninsula hosts several key gas fields, of which just one — South Tambeyskoye — has so far been developed, with its output feeding Russia’s largest LNG project, the Novatek-led Yamal LNG scheme.
Gazprom and its private partner Rusgazdobycha hold exploration and development licences for four neighbouring blocks — North Tambeysky, West Tambeysky, Tasiysky and Malyginsky— which hold estimated combined recoverable reserves of 7 trillion cubic metres of gas.
Novatek in sight
Kommersant quoted unnamed industry sources as saying that, following Novak’s request, Russia’s largest independent gas producer Novatek has renewed its push to persuade authorities to give it control of these assets.
Novatek has been pushing to gain control of the Tambey blocks since 2016, arguing that it is capable of developing these blocks faster and more efficiently than Gazprom could, as it will process the gas on the Yamal Peninsula and export as LNG without paying domestic transportation costs.
Speaking earlier in October in Moscow, Novatek executive chairman Leonid Mikhelson said the price of transporting pipeline gas from the Yamal Peninsula to Europe is now more than double the cost of shipping it to the continent as LNG.
The company has also patented its own liquefaction process, Arctic Cascade, which is based primarily on Russian-manufactered equipment, rather than foreign-manufactured equipment that is has been subject to the international sanctions imposed on Russia following its invasion of Ukraine in February.
Novatek is also leading Russian industry efforts to foster the country’s LNG export capacity, pushing the sector to develop internationally competitive technology and manufacturing standards.
Novatek had not responded to Upstream’s request for comment at the time of publishing.
Baltic LNG in limbo
Gazprom responded to an earlier threat of losing the Tambey blocks by forming the Ruskhimalliance joint venture with Rusgazdobycha, to help achieve its aim of building a major LNG and polymer facility near the Baltic Sea port of Ust-Luga.
The Baltic LNG project plans called for the development of Gazprom’s Tambey assets and construction of a dedicated 3000-kilometre pipeline to carry output to Ust-Luga.
The plans also involved building a gas processing facility to obtain feedstock for the polymer production, and construction of an export LNG plant, to be completed by 2026.
However, while the project entered the initial preparation and construction phase last year, its fate remains unclear.
The Baltic LNG scheme was based on gas liquefaction and processing facilities contracted from Germany’s Linde, which has since exited Russia following the invasion of Ukraine.
In March, Linde exited its Linde Severstal joint venture with Russian steel producer Severstal, which was contracted to deliver eight large heat exchangers to the Baltic LNG plant at Ust-Luga to underpin the project’s planned 12 million tonnes per annum LNG production capacity.
Linde Severstal has since been renamed Severnye Tekhnologii and is now owned by Ruskhimalliance and privately held Russian company Stalservis, which according to Moscow-based agency Interfax provides legal advice in the Russian city of Cherepovets but has no access to LNG technologies.
Mikhail Krutikhin, a partner with Moscow-based energy consultancy RusEnergy, said that international sanctions banning the delivery of equipment and Western know-how to Russian’s LNG industry “have effectively put an end” to the Baltic LNG project.
However, he added that construction efforts near Ust-Luga may continue until the end of 2023, because Gazxprom has already allocated funding for the project.
Nord Stream 2 trap
An additional factor weighing against the project is the fate of the Nord Stream 2 gas pipeline to Germany, which also starts near Ust-Luga, and which was to carry 20 billion cubic metres of “dry gas” processed from the Tambey blocks to be sold in Europe at a better price than the Russian domestic market.
However, one of Nord Stream 2’s two lines was damaged by an explosion in September, and German authorities have said they will not allow Russian gas flows to begin via the second, undamaged line.
- Gazprom creates Tambey gas development venture
- State lifeline: Russia promises $12 billion to Baltic LNG project
- Gazprom speeds up Yamal gas field plans as Novatek pressure builds
- Gazprom hatches major tenders for pipeline work linked to planned Baltic Sea LNG project
- Gazprom inches towards new LNG plant dreams with large gas supply deal