Novatek Inks Technology Deal For 2nd Russian LNG Project

Russian independent Novatek has signed a framework agreement on strategic co-operation in LNG with French Technip, German Linde and the Russian gas research, processing and design institute Nipigaz, it said May 3.

"The parties agreed upon the main conditions for designing and developing future LNG plants based on gravity-based structures for Arctic LNG 2 as well as subsequent Novatek LNG projects, " it said. Novatek also signed a licensing agreement with Linde for liquefaction technology for Arctic LNG 2.

This is another step before the company takes a final investment decision (FID) on Arctic LNG 2, the lower wholesale gas price meaning that projects need to find ways to cut costs sharply if they are to be profitable.

Arctic LNG 1 is better known as the Yamal LNG project, which rests on piles driven deep into the permafrost, a more expensive solution. Novatek CFO Mark Gyetvay said in January that the company hoped to take FID on Arctic LNG 2 this year, with success in lowering the costs being a key factor.

Yamal in summertime

(Credit: Novatek)

Novatek boss Leonid Mikhelson noted: "At Yamal LNG we have gained unique competencies regarding LNG projects. Capitalising on these competencies we have chosen a new technical design concept for our next LNG project. The framework agreements we have signed today allow us to significantly improve the economics on our next LNG projects, thus making our products competitive in any market."

Yamal LNG is due to send out its first cargoes late this year, thanks partly to Chinese and Russian government assistance with finance. Sanctions on a number of Russian companies and individuals have blocked access to international markets for long-term loans.

Among its other projects Nipigaz is now working on the world's biggest gas processing plant for Gazprom, at Amur in Russia's far east.

William Powell