Arctic LNG Project Drives Breakbulk Demand

By Malcolm Ramsey

As progress on one of Russia’s largest export liquefied natural gas projects near completion, the scope for breakbulk activity in the LNG sector is expected to grow this year and next.

Russian energy group Novatek revealed that its Arctic LNG 2 project, in the Gydan Peninsula on the Siberian coast, is 39 percent complete and predicted that the first production train will start operations in two years.

“Future LNG supplies depend on successfully completing new projects as well as maintaining capacity utilization of current LNG plants between 80 percent to 90 percent globally. We believe our Arctic LNG 2 is perfectly timed to help fill this projected supply gap,” said Mark Gyetvay. deputy chairman of Novatek.


Murmansk construction

The mammoth project has been a major driver for breakbulk demand in the region since it was announced in 2014, and despite restrictions and slowdowns in the oil and gas sector last year, development has continued apace.
 
“One region where we see continued demand is Russia. Following the completion of the Yamal LNG Project, we have started to ship cargo for the Arctic LNG 2 Project to Chinese module manufacturing yards, but also to the Gyda Peninsula in the Arctic,” said Karen Clarke, global key account manager at breakbulk carrier deugro.

The Arctic LNG 2 project involves the construction of three massive LNG trains, each with a capacity to handle 6.6 million tonnes per annum or mtpa, of LNG and at least 1.6 mtpa of stable gas condensate.
 
The construction of these trains involves a number of technical challenges, not least in delivering breakbulk to the remote Utrenneye field, located in the far north of Russia.

The trains feature a modular design, based on gravity-based structures (GBS) which consist of legs formed from thick concrete reinforced with steel bars and ballasted down during installation.

To fabricate these giant units, Novatek and its partners have created a dedicated LNG Construction Center in Belokamenka near Murmansk. This breakbulk handling site is responsible for assembly and installation of topside modules and comprises two dry docks as well as manufacturing plants.
 
Novatek reports that the first train of the Arctic LNG 2 project is now 53 percent complete and that about 4,100 construction workers have been mobilized at the Murmansk construction yard.


Asian LNG Demand
 
While Russia has long been established as a leading exporter of pipeline gas, the move to LNG is expected to increase as a global shift away from oil as a transport fuel puts pressure on fuelling infrastructure. Asian shipping is forecast to be a significant driver, with Novatek announcing that it is now “targeting at least 80 percent of our future LNG sales to the Asian markets.”
 
“This represents a new industry being formed in Russia as we speak. If there are more LNG projects, prices will be more attractive. And we'll be able to source Russian-made products from Russian companies with stable low prices that will further bring down our costs … Utilization of new liquefaction technology on GBS platforms at Arctic LNG 2 project and start-up of transhipment complexes in Murmansk and Kamchatka in 2023 will definitely further improve the overall economics,” said Leonid Mikhelson, CEO of Novatek.

Funding for the Arctic LNG 2 project has also brought together a diverse group of investors, with finance for the project coming from the China Development Bank, French state bank Bpifrance, German credit insurance company Euler Hermes and Japanese consortium Japan Arctic LNG, formed by Mitsui and JOGMEC.
 
With Asia expected to lead LNG growth over the remainder of the decade, large-scale projects such as Arctic LNG 2 are set to increase in prevalence, with Russia developing a number of other facilities that are set to drive breakbulk activity. 
 
“In addition to [Arctic LNG 2] we are also working to complete the Kstovo Refinery Project and an olefins project in Tatarstan,” Clarke of deugro noted.
 
The third-largest publicly traded company in the world by proved natural gas reserves, Novatek is also the independent gas producer in Russia, controlling approximately 10 percent of national gas production.
 
Prior to Arctic LNG 2, Novatek completed the giant Yamal LNG project, about 70 kilometers away across the Ob Bay. Consisting of four production train the site shipped it first cargo in 2017, following four years of construction. Earlier this month, Novatek suggested it may put forward its 60 percent stake in Arctic LNG 2 as collateral to support long-term financing.
 

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