Friday December 8, in the presence of Vladimir Putin, the first gas tanker left the Yamal LNG terminal, signaling the official go-ahead to the Russian President's project of 2009, when Putin was Prime Minister. The Yamal LNG consortium, owned by Russia's Novatek (50.1%), France’s Total (20%), China's CNPC (20%) and the Silk Road Fund (9.9%), manages the liquefaction terminal of the same name in Siberia, the second in Russia after Sakhalin. The town of Sabetta was founded to house the project and now has a population of over 30,000. An international airport has been constructed there, along with the extension of the port, now the home of the specially-designed icebreaking gas tankers that can sail directly to Asia via the Bering Strait. 15 Arc7-class icebreaker gas tankers have been ordered from South Korea's DSME (a contract totaling around $5.5 million). The first ship, named "Christophe de Margerie" after the CEO of Total who tragically died in 2014, loaded up her first cargo of liquefied natural gas (LNG) Friday.
A journey through the Arctic
As well as Putin, the ceremony was attended by the President of Novatek Leonid Mikhelson, the CEO of Total Patrick Pouyanné, the CEO of Gazprom Alexey Miller, the Russian Energy Minister Alexander Novak and his Saudi counterpart Khalid A. Al-Falih (also President of Saudi Aramco), and many other political figures. The first LNG shipment from Yamal was "greeted" by temperatures of -13°F, in a real polar night. "Congratulations to all of you, to the whole Novatek team and to those who have worked on this project. There are very skilled people in this room, and brilliant experts who told me at the start of the project that it should not go ahead. There were many reasons to follow their advice. The people who started this project took a risk, and it paid off. Today the desired result has been achieved," Putin said. "According to experts, by 2040 worldwide demand for gas will increase by over 40% and the growth of LNG could reach 70%. Russia must play a significant role in this market, which is now still relatively modest," he added. "This first LNG shipment is testament to the huge efforts of the project partners, the contractors and everyone who has succeeded in delivering Yamal LNG on time and on budget. Together we have managed to built a world-class LNG project from scratch in extreme conditions, to exploit the vast gas resources of the Yamal Peninsula," noted Patrick Pouyanné. "This massive project would not have been possible without the power of our partnership with Novatek, and shows Total's commitment in Russia. Yamal LNG is one of the most competitive projects in the world, and will contribute to gas production for many years." "We have arrived in the Yamal Peninsula, which can be compared to landing a man on the Moon. We have landed in this beautiful region for the first time and we have created a huge facility. It is a great success," Pouyanné stated.
A new gas route for Saudi Arabia, too
During the ceremony, Putin invited Saudi Arabia to purchase Russian liquefied natural gas. "Buy our gas and save oil," said the President to the Saudi oil minister Khalid Al-Falih. The Saudi minister hailed the launch of the Yamal LNG project, responding to Putin: "That's what I’m here for." In October, Minister Alexander Novak stated that Saudi Aramco would probably be interested in the Arctic LNG-2 project (also led by Novatek, with a total annual capacity of 16.5 million barrels of LNG), but nothing more was said on Friday. Gazprom might be concerned about its new competitor (Novatek is the second largest gas producer in Russia). Word is going around at Gazprom that "every cubic meter of gas shipped to Europe in the form of LNG is one cubic meter less of Russian gas from the pipelines." "The production and export of LNG should not lead to a weakening of positions in gas exports by pipeline," Putin reassured, however.
A project to redraw the map of gas exports
The current annual production capacity of Yamal LNG is 5.5 million barrels of LNG, but in 2018 the second line will be launched, with a third in 2019, giving the plant a total capacity of 16.5 million barrels of LNG per year. The project has cost $27 billion (around 60% of which has gone towards the construction of the plant). Almost all the gas has been reserved through long-term contracts linked to oil prices, with 86% heading for the Asia and Pacific markets. However, Novatek is not the only one going ahead with LNG projects. Gazprom itself is pursuing the Baltic LNG project, a plant that will product liquefied gas at Ust-Luga on the Gulf of Finland, near St. Petersburg. At the International Economic Forum in St. Petersburg in May 2018, Gazprom and the Anglo-Dutch multinational Shell are expected to sign an agreement on the Baltic LNG project. The final decision will be taken at a later date after the agreement is signed. For now, Gazprom is planning to commission the plant in 2022-2023, and aims to increase Russian suppliers’ participation in the project in the meantime.