Yamal peninsula LNG production comes on stream

Novatek's massive liquefied natural gas (LNG) project includes e.g. gas production, liquefaction plants and a harbour for shipping LNG. The first phase of the project, a production "train" unit with capacity to produce 5.5 million tons of LNG annually, was commissioned last week. The ultimate capacity of 16.5 million tons should be reached by 2019.

The Yamal-Nenets Autonomous Okrug is classed as part of Russia's Arctic Region and has long been Russia's main natural gas production area. But with Novatek's liquefaction plant it will be possible for the first time to transport the gas by sea via the Northeast Passage instead of pipelines. Shipping makes it possible for Russia to export gas e.g. to Asia, to which there is currently no pipelines from Russia.

The gas from Russia's so far only LNG facility on Sakhalin Island has also been supplied to Asia. Inaugurated in 2009, the Sakhalin plant last year produced nearly 11 million tons of LNG, or about 8 % of total Russian gas exports. With the first phase of the Yamal project completed, Russia can export a total of about 16 million tons of LNG (22 billion m3 of gas). The total volume of global LNG exports last year corresponded to about 350 billion m3 of gas.

The French Total and the Chinese CNPC are the largest minority stakeholders in the Novatek project. China's Silk Road Fund also bought a stake in the project after Novatek became subject to US financial sanctions. The project is expected to cost around 27 billion dollars. It has received financing e.g. from Russia's National Welfare Fund (about 2.5 billion dollars), loans from Chinese (about 12 billion dollars) and Russian state banks (about 4 billion dollars). Russia has granted tax breaks to the project and LNG is exempt from export duties (gas transmitted by pipeline is subject to a 30 % export duty).