Russia’s largest independent gas producer Novatek has acknowledged that foreign contractors are likely to deliver a larger share than originally expected of components and units for its second liquefied natural gas project in the country’s Arctic region - Arctic LNG 2.

Speaking this week at the National Oil & Gas Forum in Moscow, the head of Novatek’s localisation department Pyotr Rodyushkin said it has held “dozens of sessions with potential Russian contractors to identify their competence” in fabricating equipment and units the company will need for three trains at its future LNG plant on the Gydan peninsula.

He said that Novatek identified equipment of “average complexity” that could be produced in Russia with support from the gas producer and its lead project designer, SPG Novaengineering, and later used for the project.

However, Russian contractors demonstrated just “minor advances” in what Rodyushkin described as “strategic technologies” required for the plant, such as gas turbines.

Novatek also found out that some of the required technologies and competencies simply do not exist in Russia, and may only be localised if Russian fabricators purchase know-how and technical licences from international companies.

Another factor holding Russian contractors from developing their own technologies for Arctic LNG 2, is a lack of facilities where new equipment can be tested, Rodyushkin said.

He added that Novatek is continuing talks with international contractors to determine whether they may be capable of moving production of some units into Russia. Under its local content commitment, Novatek is investing heavily in building a new yard near the Russian port of Murmansk in Kola Bay, where concrete gravity-based structures are set to be constructed, Rodyushkin said.

Each LNG train will be fixed on top of a GBS which will be towed to Gydan peninsula for installation in the shallow waters of Ob Bay.

Novatek currently plans to commission the first train of Arctic LNG 2 between 2022 and 2023.

Novatek deputy executive chairman Alexander Fridman said earlier that the company has no intention of using local content “at any price”, as Arctic LNG 2 has to remain “economically effective and competitive internationally”.

At least four Chinese yards are understood to have submitted pre-front-end engineering and design technical and commercial proposals, covering module delivery for the first train, to engineering giant TechnipFMC, which is working with SPG Novaengineering in partnership with Germany’s Linde and Russia’s Nipigaz.

These yards were responsible for building and delivering the bulk of the 600,000 tonnes of modules for Novatek's Yamal LNG asset, the first train of which started up last December.

Meanwhile, Mikhail Ivanov, a department head in the Russian Trade & Industry Ministry, said it has proposed a plan to finance R&D efforts by selected Russian manufacturers to “acquire competence” in producing equipment and supplies for mid-to-large-scale LNG projects.

The ministry proposed the government spend 10 billion rubles ($164 million) in the next three years to finance such efforts.

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Novatek faces local content challenges