Novatek says new Arctic projects will proceed as planned, despite a sharp drop in LNG exports

A COVID-19-related drop in gas shipments won't affect longer-term plans, the company said.

By Atle Staalesen, The Independent Barents Observer - April 13, 2020
Less LNG is being shipped from Sabetta, the terminal in the Yamal Peninsula. (Atle Staalesen / The Independent Barents Observer)

Amid a world economic crisis, the Russian gas company Novatek is shipping less liquefied natural gas than it was just a few months ago. But the company says it will continue construction of several big natural gas projects in the high north, including a transshipment terminal near Russia’s border with Norway.

Novatek’s first quarter report for 2020 shows that exports of LNG dropped by 28.4 percent to 2.45 billion cubic meters compared with the same period in 2019.

The company has also reduced its domestic natural gas sales. A total of 18.24 billion cubic meters was sold in the Russian Federation in the first three months of the year, a decline of almost 3 percent.

The drop in sales coincides with the outbreak of the COVID-19 and subsequent meltdown of the global economy. Since the beginning of 2020, average global prices for LNG have dropped about 50 percent.

‘No change of plans’

At the same time, the company makes clear it has no plans to make major changes in its Arctic projects currently under development. The building of new LNG plants will proceed as planned, Novatek leader Leonid Mikhelson told journalists, according to RBC.

That includes the Arctic LNG 2 in the remote Gydan Peninsula where production is due to start in 2023, as well as the smaller Ob LNG in Yamal. Novatek is also continuing to construct a grand plant for production of LNG platforms in Belokamenka near Murmansk.

In addition come plans for the building of a transshipment terminal in Ura Guba, a bay on the Barents Sea coast not far from Norway. This terminal is projected as a major logistical hub for the company’s Arctic operations and will be able to handle 20 billion tons of LNG per year. Ice-class carriers will shuttle from Yamal and Gydan with LNG destined for western markets. The liquified natural gas will subsequently be shipped westwards by conventional tankers.

The Ura Guba also houses one of the Northern Fleet’s most important bases for nuclear submarines, and negotiations have been held between Novatek and the Russian Ministry of Defense.

Plans approved

Federal authorities in late March approved key parts of the company’s plans in the area. In addition to three offshore reloading points, the project also includes two major storage reservoirs anchored to the sea bottom. The reservoirs will be 330 meters long and 60 meters wide, state port company Rosmorport informs.

The transshipment facility will be able to serve 300 long LNG carriers.

With the building of the Ura Guba terminal, Novatek will be able to put an end to its transshipment operations in Norway.

In the period between November 2018 and July 2019, more than 300 tankers sailed into the Norwegian Sarnes Fjord near Honningsvåg and reloaded several million tons of LNG from Yamal.

In March this year, Novatek resumed reloading in Honningsvåg.

Arctic crisis

The crisis that now haunts the international economy will inevitably have a heavy toll on planned investments in the Arctic. That includes the huge oil and gas projects that are outlined in Russia’s new strategy document for the Arctic.

However, the biggest Russian companies maintain that their plans will proceed. The country’s biggest energy company Gazprom, in a statement, assures that planned investments will move ahead.

That includes the expansion of the Bovanenkovo project in Yamal, as well a the Kharasavey project, the company informs.