Russian authorities have disclosed they are prepared to fully finance a plan by the nation's state-run monopoly Gazprom and privately held Rusgazdobycha to build a liquefied natural gas plant and gas-to-polymers processing facility near the Baltic port of Ust-Luga.

According to Russian Finance Minister Anton Siluanov, authorities are working on arranging lending terms for the project’s operator, Ruskhimalliance, to obtain a credit line of up to 900 billion rubles (US$12.2 billion).

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The funds will be disbursed from Russian National Welfare Fund, established to accumulate excessive tax payments by Russian companies from their exports of oil, gas and other natural resources.

According to the Finance Ministry, the fund held about 14 trillion rubles of cash reserves in the beginning of September.

Though the authorities have previously permitted using the fund to bankroll several key energy and infrastructure projects, the amount of financing is unprecedented for a single lender, according to industry analysts in Moscow.

Additionally, the project in Ust-Luga might not be as economically attractive compared to Novatek's existing and future LNG plants on the Yamal and Gydan Peninsula, which are located close to producing fields.

Under the plan, announced in 2019, the venture will operate a facility in Ust-Luga to process so-called “wet gas” that will be delivered from the group of Tambey fields on the Yamal Peninsula in West Siberia at a maximum annual rate of 45 billion cubic metres.

This facility will remove ethane from the gas mixture that will be used as feedstock for the production of polymers.

According to Gazprom, 18 Bcm of processed “dry gas” will be returned into the trunkline system for delivery to domestic customers and for exports, while the remainder will be liquefied at a planned LNG plant and be shipped to international markets.

The planned two-train LNG plant will have nameplate annual capacity of 13 million tonnes.

Additionally, up to 2.2 million tonnes of liquid petroleum gas will be offered to the market.

EPC contracts signed

Earlier this year, Ruskhimalliance signed engineering, procurement and construction contracts for the wet gas processing facility and the LNG plant with a consortium of Germany’s Linde and Turkey’s Renaissance Heavy Industries, after securing an initial 55 billion rubles credit line from state-controlled VEB bank.

At the time of announcing the project, Gazprom estimated that it will require financing of more than 700 billion rubles, or about $11 billion at that time.

Ruskhimalliance is understood to be adrift from inexpensive western project financing because its shareholder Rusgazdobycha is owned by influential Russian businessman Arkady Rotenberg.

Rotenberg is an associate of President Vladimir Putin who has won lucrative construction contracts from Gazprom and the government.

However, Rotenberg and his building ventures in the country have been included on the list of US and European sanctions since 2014 after Russia's annexation of the Crimea Peninsula from Ukraine.