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Russian Gas Giant Novatek Presents Answer To U.S. Shale

In the same way that the U.S.’s global hydrocarbons power has been turbo-boosted by the rise of its shale energy industry, which began with gas in earnest in 2006 and with oil in 2010, so Russia’s has seen its own oil and gas power extended by the sustained development of its Arctic oil and gas reserves. As of now, Russia’s Arctic sector comprises over 35,700 billion cubic metres of natural gas and over 2,300 million metric tons of oil and condensate, the majority of which are located in the Yamal and Gydan Peninsulas, lying on the south side of the Kara Sea. According to Russia’s President, Vladimir Putin, the next 10-15 years will witness a dramatic expansion in the extraction of these Arctic resources. The period will also see the corollary build-out of the Northern Sea Route as the primary transport route to monetise these resources in the global oil and gas markets, especially to the Kremlin’s core economic and geopolitical partner, China. Russia’s number two gas producer (after state-owned Gazprom) – Novatek – is at the heart of these plans and last week made further significant announcements to this end.

The first of these, according to Novatek’s chief financial officer, Mark Gyetvay, is that the company’s Arctic liquefied natural gas (LNG)-2 project, based on the Gydan Peninsula, will receive at least an additional US$6 billion in investment this year, 50 percent more than last year. This will be in line with ensuring that the first of the project’s three proposed production lines is launched in 2023, with around 40 percent of the LNG plant currently completed.

Overall, Gyetvay added, the participants in Arctic LNG-2 have already approved US$11 billion in external financing for it, with a third of the total coming from Chinese banks, another third from banks in Europe and Japan, and the remainder coming from Russian financial entities. There is no question that whatever the amount required to successfully bring in the Novatek project it will be found, as the effective sequestration of as large a portion of the Arctic’s oil and gas resources as possible is one of Putin’s principal personal political objectives. “The entire Arctic development is an absolute priority for President Putin, aimed at bringing Russia’s LNG standing in the world market into line with its status as a global gas superpower, as its LNG capability has always been way behind what its gas production power would warrant,” Andrey Polischuk, senior oil and gas analyst from Raiffeisenbank, in Moscow, told OilPrice.com.


Indeed, just last week, Russian state development bank, Vnesheconombank, together with a consortium of other Russian banks, announced a 15-year loan to the project totalling €3.11 billion (US$3.7 billion). The result of these efforts will be that the Arctic LNG-2 project will have three major LNG production plants (trains) of 6.6 million tons per annum (mtpa) each, totalling 19.8 mtpa, and a cumulative gas…

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2021-05-10 17:00:00

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