More energy for Russian ports
The world’s major ports are surrounded with strong industrial zones which are local economy growth centers. In Russia, such centers just start developing with gas-to-chemicals and hydrogen production being the most promising sectors.
A Special Economic Zone of industrial type is to be created in the Port of Ust-Luga, the Leningrad region. As the Leningrad Region Government told IAA PortNews, it submitted the application in late 2021 and the project got the federal support. The decision was made at the meeting chaired by Yury Trutnev, Deputy Prime Minister of the Russian Federation - Presidential Plenipotentiary Envoy to the Far Eastern Federal District, in mid-February 2022.
The SEZ is to accommodate a gas processing and chemical cluster the construction of which was launched in May 2021 near the town of Ust-Luga in the Leningrad Region. The complex on processing of ethane-containing gas (CPECG) is a unique cluster combining gas processing, gas-to-chemical production and liquefaction of natural gas. CPECG will include two major facilities: Gas Processing Complex (GPC CPECG) operated by RusChemAlliance, a joint venture of Gazprom and RusGazDobycha, and a technically affiliated Gas Chemical Complex (GCC CPECG) operated by Baltic Chemical Complex, a subsidiary of RusGazDobycha.
The cluster facilities are to process 45 billion cbm of gas, produce 13 million tonnes of LNG, up to 3.8 million tonnes of ethane fraction, up to 2.4 million tonnes of LPG, 0.2 million tonnes of pentane-hexane fraction and up to 3 million tonnes of polyethylene per year.
As Dmitry Yalov, Deputy Prime Minister of the Leningrad Region, told IAA PortNews, “Creation of a SEZ in Ust-Luga close to the largest deep-water seaport in the Baltic Sea and well developed transport and logistic infrastructure as well as implementation of the CPECG project will give an impetus to new investments. The project and the special conditions can attract related manufactures and research centers to the Leningrad Region with SEZ allowing for maximum involvement of the cooperation chains”.
More than 5,000 permanent jobs are to be created to man the operation of the facility which is to facilitate the development of the entire region.
Given the direct access to the natural gas, the idea looks economically viable since it provides for the increase of non-resource exports and raising of the product’s added value with its access to the seaport.
Taking into consideration Russia’s reserves of hydrocarbons and the growing role of alternative energy sources worldwide, gas processing and gas-to-chemicals projects have good prospects. Other projects in this segment are include Irkutsk Polymer Plant (INK Group), Amur Gas Chemical Complex (Sibur and Sinopec), Ob Gas Chemical Complex (former Obskiy LNG, Novatek) on the Yamal peninsula near the port of Sabetta.
Investments into gas chemical projects are expected to exceed RUB 3 trillion by 2030.
As for LPG export prospects, Aleksey Markov, Hydrocarbon Marketing and Sales Director, SIBUR, said at online conference “Argus LPG 2020: Non-CIS and Global Markets” that LPG production in Russia is expected to grow by 52.7% to 22.6 million tonnes in 2026. “Organic growth of LPG is expected from conventional refineries, from companies developing new projects, particularly Rosneft and new players, Gazprom and RusGazDobycha in Ust-Luga”, said Aleksey Markov. The development of LPG export potential will let advance in the promising market of China where LPG from the USA was dominating.
Today, Russian LPG is handled at the ports of Temtyuk, Taman and Ust-Luga.
To implement the projects in the framework of Ust-Luga SEZ it is necessary to introduce amendments in the laws of the Russian Federation. A related draft law has already been submitted by RF Government to the State Duma. The decision on establishment of Ust-Luga SEZ will come into effect when the bill is signed into law.
Hydrogen projects
Another result of the focus on alternative energy sources is the development of projects aimed at production and export of hydrogen.
Ust-Luga is actually being considered as a site for infrastructure on storage, production and shipment of hydrogen. In fact, it is a project on production of so called ‘blue hydrogen’ from natural gas given its availability.
As Dmitry Yalov, Deputy Prime Minister of the Leningrad Region, said earlier: “we make provision for land reserves in view of projects on hydrogen energy, production of hydrogen in the south and in the north of the region, particularly within the special economic zone being created around the Baltic Chemical Company and RusChemAlliance in the port of Ust-Luga”.
As it is known, ‘green hydrogen’ should be produced through application of clean sources of energy. The Leningrad Region counts on organization of supplies of ‘green hydrogen’ produced involving the wind energy. “We are also in active negotiations with the potention investors into wind farms on supplies of green energy for production of hydrogen”, said Dmitry Yalov.
The growing demand for ‘green hydrogen’ will open new opportunities for the energy sector development in remote regions of Russia. Under consideration is the project on construction of the Penzhenskaya tidal power plant in the north-eastern part of the Shelikhov Bay in the Sea of Okhotsk. Investments into the project are estimated at $500 billion.
“If we are able to build a plant for electrolysis near the Penzhenskaya tidal power plant as well as a port for exports of hydrogen to Japan (which is to consume 3 million of hydrogen per year from 2030 with no local production facilities) it (the market – Ed.) is estimated of up to $15 billion per year”, said Anatoly Chubais, special representative of RF President for relations with international organisations to achieve sustainable development goals, when speaking at Gaidar Forum. According to him, the hydrogen industry can be a breakthrough for the energy sector of the Far East and the North since it makes the construction of large power plants in the scarcely populated region reasonable.
It should be noted that, there is also a project on construction of a tidal power plant in the Murmansk Region (Severnaya TPP).
So, the energy transition can give the ports of Russia a new impetus to the development and diversification of their cargo base thanks to appearance of gas, chemical and energy production facilities.
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