Gazprom signs off on Baltic gas hub plan

03 April 2019, Week 13, Issue 1025

Russia’s Gazprom has taken an FID on a US$10.7 billion gas processing and LNG production complex on the Baltic Sea coast.

The state gas producer is implementing the project with private Russian player RusGazDobycha. The complex will annually process up to 45 bcm of ethane-rich natural gas, and will produce 20 bcm of purified methane, along with 13 million tonnes of LNG, 4 million tonnes of ethane and more than 2.2 million tonnes of LPG. Its first production train is slated to start up in the second half of 2023, while its second should come into operation in late 2024.

The focus for the partners will now be on drawing up basic and detailed design documentation, as well as readying a 1,400-hectare area of land at the port of Ust-Luga for construction work. The pair will also begin selecting EPC contractors and place orders for long-lead items.

“Within a short time, we are going to build the most powerful gas treatment and liquefaction plant in the country,” Gazprom CEO Alexei Miller said in a statement. “Combining the production of LNG and ethane at a single industrial site significantly improves the economics and specific indicators of the project, and significantly reduces resource and price risks.”

Gas supplies for the complex will be sourced from Achimov and Valanginian deposits in the Nadym-Pur-Taz region of Western Siberia. Gazprom set up a JV with RusGazDobycha to exploit a trio of fields in this area in April 2017. They filed plans with authorities to develop the first of these deposits, Semakovskoye, in February, with first gas expected in 2022.

Gazprom estimates that the Ust-Luga complex will cost 700 billion rubles (US$10.7 billion) to build, but will generate US$4 billion in annual revenues. Besides expanding Russian LNG exports, it will also increase the country’s overseas LPG sales by 30-40%, the company said.

The complex’s ethane production will be supplied to a 3 million tpy polymer plant being developed by RusGazDobycha. Processed methane will presumably be sold on to customers in Europe via the 55 bcm per year Nord Stream 2 pipeline. Scheduled for completion by the end of this year, Nord Stream 2 will run from Ust-Luga, under the Baltic Sea and make landfall in Germany.

Gazprom did not say whether the project would have an impact on its plan with Royal Dutch Shell for a 10 million tpy LNG export terminal near Ust-Luga. The two companies have carried out feasibility studies and have signed a framework agreement to build the liquefaction plant, but are yet to take an FID.

RusGasDobycha is a division of National Chemical Group, a company with purported ties to Russian businessmen Arkady Rotenburg and Artem Obolensky. Gazprom has also signed a memorandum with the company on joint production and processing of gas at the Tambey fields on the Yamal Peninsula.

Joseph Murphy

Edited by

Joseph Murphy


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