Novatek Aims for 70% LNG Localisation by 2026

Russian gas producer Novatek is aiming for 70% localised construction of its future LNG projects by the time the third train of its Arctic LNG 2 project is completed. The first train for Arctic LNG 2 is expected on-stream in 2023, the second in 2024 and the third in 2026.

At the same time, Novatek expects to take a final investment decision "after the end of the first half of next year" on its planned 5mn mt/yr Ob LNG facility, which will use liquefaction technology developed by the company itself.

The comments were made by CFO Mark Gyetvay speaking at the LNGgc conference in London October 9. He has previously spoken of the need to protect investments from the threat of US sanctions. The company's own liquefaction technology – Arctic Cascade – has been designed specifically for Arctic conditions.

Murmansk will be the centre of the Russian company's LNG platform. Modules will be constructed there and floated out to the company's planned Arctic LNG projects. Gyetvay said the localisation figure included joint ventures set up with foreign partners for construction in Murmansk. Modules for Arctic LNG 2 will initially be built in China, he said. 

Northern Sea Route to open all year

Gyetvay said the company was investing much time and energy in developing efficient delivery logistics. In particular, he said that by 2025, owing to the Russian government's build out of new nuclear ice breakers, the Northern Sea Route (NSR) across the Arctic would be open all year, as opposed to seven to nine months now, depending on the weather.

This meant that 80-85% of Arctic LNG 2's exports could go to Asian markets, Gyetvay said.

The NSR cuts transit times and fuel costs from northern Russia to Asia in half, reducing the travel time to China from 36 to 18 days for example.

Novatek is developing transhipment points at Murmansk for westbound exports and at Kamchatka for eastbound trade. Transferring LNG from ice class carriers to conventional carriers speeds up delivery times and allows the ice class tankers to be fully deployed in the conditions they are designed for, meaning fewer will be necessary in total, Gyetvay said.