Construction of Novatek’s Arctic LNG 2 project is ahead of schedule

Satellite images reveal the beginnings of a sprawling industrial complex on the Gydan peninsula.

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Vessels docked at Arctic LNG 2 facilities in Fall 2019. (Novatek via High North News)

Russia’s largest private natural gas producer, Novatek, reports that it is “slightly ahead of schedule” for opening Arctic LNG 2 by the end of 2022. The facility will consist of three production lines, or trains, and is designed to produce 19.8 million tons of LNG annually. The Arctic LNG 2 plant will utilize natural gas from the nearby Utrennoye field. The project is located across the Ob Bay from the existing Yamal LNG plant which opened in 2017.

Last month the construction site on the Gydan peninsula received 20,000 tons of construction material. The world’s sole nuclear-power icebreaking cargo ship Sevmorput delivered reinforced concrete and metal structures, large pipes, and construction and electrical equipment from Arkhangelsk. Sevmorput made two similar deliveries last summer and several more are scheduled for 2020.

The nuclear icebreaker Vaygach assisted in creating an approach channel to the landfast ice for unloading. After unloading, the vessel departed on April 5 in the direction of Murmansk.

Satellite imagery shows new infrastructure

Based on satellite images initial construction of docks and roads began in 2016. Since then offices, housing, and storage facilities have been constructed and major earth work in preparation of constructing the actual LNG plant has been conducted.

The bulk of the foundation work is currently conducted in a construction yard near Murmansk. Arctic LNG 2 relies on gravity-based structure (GBS) platforms pre-assembled off-site. The platforms are then towed into place and intentionally sunk in shallow waters to serve as foundation for the plant.

Satellite images show a shipping channel through the sea ice to the Arctic LNG 2 facilities. (Google Earth via High North News)

Recent images also show the approach channel through the ice-covered waters Sevmorput used last week during its delivery. Winter sea ice usually retreats from Ob Bay by May or early June allowing unassisted cargo deliveries during the summer months.

Upcoming decision on Ob LNG

Novatek holds a 60 percent stake in the project, while its partners Total, Chinese CNPC and CNOOC and a Japanese consortium each hold 10 percent. Novatek had also solicited investments from Saudi Arabia and India, among others. Arctic LNG 2 is scheduled to open at the end of 2022 with the second and third production lines to follow in 2024 and 2026.

Novatek aims to substantially reduce construction costs, from $27 billion for Yamal LNG to $20-21 billion for this new project.

An investment decision on a smaller project, Ob LNG, consisting of two 2.5-million-ton production lines is expected for the first half of 2020. Additional plants, Arctic LNG 1 and 3, may follow during the second half of the decade. No investment decisions have been made on these projects.

In order to deliver natural gas from its Arctic fields to Europe and Asia the company relies on a growing fleet of specialized ice-class LNG tankers. Another key building block in Novatek’s strategy to export LNG will be two transshipment hubs outside ice-covered waters near Murmansk, Russia and on the Kamchatka peninsula in the Far East.

In addition Novatek has partnered with Norwegian firm Tschudi to transfer LNG in the North of Norway. Reloading operations began two weeks ago and are scheduled to continue until the end of May.