Russia looking into liquefaction
The demand for LNG is going up worldwide. Gazprom and Rosneft, wishing not to loose this market, have announced their plans on construction of LNG terminals in the Baltic and the Far East regions. However, Russia may miss the opportunity of gaining a foothold in this market – when the projects are implemented the majority of volumes will be contracted.
To hurry up
The growth of the demand for LNG is driven by its increased production, gas supply diversification policy, sustainability of natural gas as a fuel, improved technologies of its liquefaction and transportation. For Europe it is a matter of energy security and independence. For Asia – a method to satisfy growing demand for natural gas. For Russia, as gas exporter, - new opportunities and perspectives, diversification of supply lines as well as a method not to loose in competition.
According to the forecasts of the Energy Center of Moscow School of Management SKOLKOVO, by 2030, global demand for LNG will surge over two-fold to some 500 mln t per year. In Europe, it will boost almost three-fold: from current 47 mln t to 130 mln t per year. Well developed Asian countries (first of all Japan and S. Korea) are expected to raise LNG consumption by 40%. The leader will be the South-East Asia (relatively new player in LNG market) – China, India, Pakistan Vietnam, Indonesia, Malaysia, Thailand. Their LNG demand is expected to grow 8 times by 2030.
According to the estimates of NOVATEK co-owner Gennady Timchenko, annual demand for LNG from China alone can reach 100 mln t by 2030. Timchenko thinks it is important for Russia not to miss this market as it can be occupied by foreign players, like those from Australia. “It does not matter whose gas it is to be, ours or Gazprom’s – the main thing, it should be Russian”, Timchenko said when interviewed by TV channel Russia-24.
As of today, major producer of LNG is Qatar occupying over one third of the global LNG production market. It is followed by Malaysia, Australia, Nigeria, Indonesia, Trinidad, Tobago and Algeria while Russia is the 8th in the list of largest exporters. Meanwhile, LNG expansion plans have been announced not only by Australia mentioned by Timchenko, but also by the USA, Canada, states of Eastern Africa etc.
At the same time, experts say, major LNG volumes towards Asia have been contracted so Russia will have to hurry up now. Today, Russia has only one terminal for LNG export. It operates within the framework of Sakhalin-2 project. With its annual capacity of 10 mln t it allows Russia hold the 8th position of the rating. There are three LNG plants in St. Petersburg vicinity but their volumes are low.
Yamal-LNG
Yamal LNG project which is currently underway in Russia is owned by Novatek with participation of foreign investors – French Total and Chinese CNPC. According to Gennady Timchenko, the first vessel is expected to be loaded at port Sabetta (Yamal peninsula) in the first quarter of 2017. Potential export of LNG via Sabetta is 16.5 mln t per year with the first phase allowing export of 5-6 mln t per year. The dredging in port Sabetta will reportedly start in late July 2013.
Pechora-LNG
Pechora LNG project is nearing the start of implementation. Pre-investment studies were executed in 2012. Within the framework of the project, a floating LNG plant is to be located near Indiga and linked with Pechora fields by a 300-km pipeline. According to the estimates of the project investor ALLTECH Group, the plant is supposed to be put into operation by the end of 2018. As the Governor of Nenets autonomous region Igor Fedorov told in his interview to PortNews IAA, private investment into the project implementation to total $12 bln.
The actual complex will provide dry gas processing in the volume of 4 billion cubic meters per year and 2.6 million tones LNG production even at the first phase. For LNG production, the Air Products will apply APCI liquefied technology. Capabilities of the gas processing plant expansion to 8 billion cubic meters are put in the project. Asian-Pacific region is specified as Commodity market to a product.
Aside from consideration of a traditional onshore construction method of LNG plant, Pechora LNG explores the possibility to put to use Floating Liquefied Natural Gas Barge technologies (FLNG), providing production, processing, liquefaction, storage and shipment out of a shore land. It is assumed to use the basic facility without production and processing elements - FLSO in Pechora LNG Project. Thus, the concept of field development and transport scheme is not changed.
Gazprom projects
The construction of a LNG plant and export terminal on the coast of the Gulf of Finland is among the potential projects. Its investor is Gazprom OJSC. A Memorandum of Understanding and Cooperation with regard to implementation of LNG plant project in the Leningrad Region was signed by Alexey Miller, Chairman of the Gazprom Management Committee, and Alexander Drozdenko, Governor of the Leningrad Region. The signing ceremony took place in the presence of Russian President Vladimir Putin as part of the St. Petersburg International Economic Forum 2013. The plant is to produce 10 mln t of LNG per year, which is to make it the largest one in ECA. As Pavel Oderov, Head of Gazprom’s International Business Department, said at the Baltic Sea Forum, the pre-investment feasibility study is to be completed by the end of 2013, neither the terminal’s parameters or location, nor the method of bunkering have been determined yet. Part of LNG can be used for bunkering purposes (as the Baltic Sea is an ECA zone). Meanwhile, Oleg Vodeneev, Deputy Director General of Primorsk Commercial Seaport, who also attended the Forum, said that his company is negotiating the possibility of building such a terminal in the port of Primorsk with Gazprom in particular.
Another Gazprom’s project - Vladivostok LNG – with the capacity of 15 mln t per year is to be implemented at Lomonosov peninsula (Perevoznaya Bay). The first line is to be launched in 2018. The plant will be supplied with gas from the Sakhalin, Yakutia and Irkutsk gas production centers. About the use of LNG as a bunker fuel in Baltic and North Sea ECAs read in journal Port Service. Bunkering market.
Rosneft projects
Another large Russian company Rosneft also has its plans on construction of LNG plant and export terminal. Rosneft President Igor Sechin and Sakhalin region’s Governor Alexander Khoroshavin have recently signed a Supplement to the Cooperation Agreement. The parties agreed to discuss the construction of an LNG facility and all required gas pipeline infrastructure in the region. The LNG facility is expected to be set up in a land plot in the vicinity of Ilyinskoye and Taranai villages. The facility’s annual capacity is planned at 5 mln t with implementation expected by 2018.
Shipping issue
LNG image has been also boosted with the improved technologies applied for construction of LNG carriers. Earlier, economically feasible transportation of LNG required the distance exceeding 6,000 km while today, 2,500 km is enough. It is especially important for Russia that national companies earn on LNG transportation. In this case, LNG export will ensure a considerable multiplicative effect for a Russian economy. And there is a sufficient background for it.
Within the framework of the Saint-Petersburg International Economic Forum 2013, Gazprom Marketing & Trading (GM&T), Russian Maritime Register of Shipping, United Shipbuilding Corporation and Sovcomflot signed a number of agreements on reservation of construction slots for "Gaz Ice" carrier series and promotion of Russian involvement in LNG shipbuilding.
To ensure LNG shipping by sea from the Gazprom Group projects Vladivostok LNG and Sakhalin-2, provision will be made for possible construction during 2017-2021 of up to 13 highly sophisticated LNG carriers, involving the shipyard Zvezda (Bolshoy Kamen, Primorsky Region, Russia). The plan approval and construction survey for the LNG carriers will be performed by classification society Russian Maritime Register of Shipping.
Under this Agreement, Gazprom Marketing & Trading will give priority to Russian Maritime Register of Shipping in carrying out the projects of LNG production and transportation. RS will, in its turn, provide consultations for the company on matters connected to ship, including LNG carriers, design, construction, classification and certification, carry out on a priority basis ship design appraisals upon the request of GM&T, including conceptual designs. Besides, the parties will cooperate in improving the education level of Russian seafarers and in implementing innovative technical solutions for shipbuilding and maritime safety.
The agreement signed in Saint-Petersburg provides for the phased localisation of production at OAO USC facilities and the start of LNG carrier construction at Russian shipbuilding enterprises by 2018. Russia’s first gas carrier to be manufactured on home soil is expected to be built as early as 2020. These new vessels will transport fuel from existing (and future) Russian LNG terminals in the Far East and the Arctic.
Besides, at the Saint-Petersburg International Economic Forum, Sovcomflot, OAO Novatek and the state corporation “Bank for Development and Foreign Economic Affairs” (Vnesheconombank) signed a memorandum on cooperation as part of the Yamal LNG project, providing for the construction of two gas-carriers for the Yamal LNG project.
According to the document, Vnesheconombank is to look into the possibility of financing the construction of two ‘pilot’ liquefied natural gas carriers for the Yamal LNG project. Sovcomflot has confirmed its interest in operating the new vessels as a bareboat charterer and technical manager.
The LNG carriers are due to be built at one of the world’s leading shipyards, following a tender process.
The design of the 170,000m³ capacity gas carriers has been specially developed for the LNG Yamal project and is unique in its technical characteristics. A high ice class (Arc7) means the new vessels are well suited to the challenging climatic conditions of the Arctic. To ensure uninterrupted operations, the gas carriers will be fitted with a diesel-electric propulsion system that includes three Azipods, each with an output of 15MW. At present, there are no other gas carriers in the world with an equivalent overall propulsion power.
To service Pechora LNG project, there is a plan to build several ice class (Arc 4) gas carriers with the capacity of 180,000 m3 each. The contract has been signed with the Far East Center of Shipbuilding OJSC (part of United Shipbuilding Corporation).
“We are prepared for the programme on construction of new gas carriers … for the moment being, it can be acknowledged that we hold the leading position in the global market of gas carriers,” says Mikhail Ayvazov, Director General of RS.
Vitaly Chernov