Shell, Gazprom Inch Ahead with Baltic LNG

Shell CEO Ben van Beurden and his Gazprom counterpart Alexei Miller signed a heads of agreement June 3 (Saturday) at the St. Petersburg International Economic Forum to set up a Baltic LNG joint venture. Shell though said it was too soon to say when a joint venture would be established.

Gazprom said June 1 that Japan’s Mitsui and Itochu expressed interest in the planned 10mn mt/yr liquefaction project at the Russian port of Ust Luga.

Gazprom noted that its HOA with Shell describes the concept behind the joint venture, which will secure financing for and carry out the design, construction and operation of the Baltic LNG plant adding that, based on that concept, the duo would need to take further steps to implement the project.

Shell told NGW that the key terms and principles were agreed for possible formation of the joint venture, but that it was too early to give an indication of when it would be established. Both firms also June 3 signed a joint study framework agreement on the Baltic LNG project.

A year ago Gazprom and Shell signed a memorandum of understanding on the Baltic LNG project.

The project, like many others, is confronted by a world awash with LNG but, in common with a Black Sea smaller scale LNG project with OMV announced in St Petersburg, may be boosted by the small but growing marine LNG bunkering market in each region.

The planned Baltic LNG project at Ust Luga (Map credit: Gazprom)

Sakhalin LNG train 3 Feed 'nearly complete'

Also June 3, Gazprom and Shell discussed plans for a third train at their Sakhalin LNG export complex. In December 2015 Sakhalin Energy awarded front end design and engineering (Feed) contracts for Train 3 to Shell Global Solutions International and Giprogazcenter.

Speaking June 5, a Shell spokesperson said the Feed stage is “nearly completed” and that next steps include a gas sales and purchase agreement between Sakhalin Energy and either Gazprom or the Sakhalin 1 consortium, a final investment decision, then construction. “All partners are committed to moving the project ahead as fast as possible,” said Shell adding it could not comment on a potential start-up date at this point.

The Sakhalin LNG plant produced some 10.9mn mt LNG in 2016, exceeding its design capacity by over 1.3mn mt, said Gazprom. Gazprom has 50% plus one share in operator Sakhalin Energy, while Shell has 27.5% minus one share, and Mitsui and Mitsubishi 12.5% and 10% interests respectively.  

A few days earlier on June 1 in St Petersburg, Shell and Gazprom Neft signed agreements relating to their Yamalo-Nenets and Salym oil and gas interests. Shell is also working with Gazprom on Nord Stream 2, a pipeline project to ship gas to Europe and due to be start in late 2019.

Mark Smedley