LNG

Gaztransport and Technigaz (GTT), the French designer of LNG storage tanks for ships and for onshore including record licensing orders for LNG carrier membrane tanks, has decided on a full withdrawal from contracts for Russian ships and projects.

GTT has been involved in tank design for 15 ice-breaker LNG carriers currently being built at the Zvezda Shipbuilding Complex (Zvezda) in the Russian Far East and for the design of three gravity-based storage tanks for other projects.

The Paris-based company said that as of October 1, 2022, revenues of €74 million ($80M) remained to be recognised for the ice-breaking LNG carriers by 2025 and €12M for the GBSs by 2027, which was a total exposure representing less than 6 percent of the order book.

“Following an in-depth analysis of European sanction packages No. 8 and No. 9 notably prohibiting engineering services with Russian companies, the group announces that it is ceasing its activities in Russia,” stated GTT.

The company explained that as of January 8, 2023, the contract with Russia’s Zvezda would be suspended and GTT's interventions would be limited, on the two most advanced LNG carriers, to ensuring the “safety of the projects” and the “integrity of the technology” in compliance with the international sanctions in force.

GBS projects

With regards to the GBS projects, the terms of GTT's departure are currently being finalised.

GTT added that these elements would have a financial impact mainly from 2023.

“GTT's order book will no longer include projects in Russia in the future. In addition, from 2023 onwards, the group's annual targets will exclude the revenues and EBITDA that would be generated by the last services in progress in Russia,” it added.

The company added that other shipping orders under construction in Asian shipyards, relating to six ice-breaking LNG carriers and two Floating storage units (FSUs), are intended specifically for Russian Arctic LNG projects.

“To date, these projects are proceeding normally. As of October 1, 2022, these orders represented a total revenue of €31M for GTT, to be recognised by 2024,” it said.

“Finally, eight conventional LNG carriers ordered by international shipowners, under construction in Asian shipyards, are also intended for Russian Arctic projects, but can operate in all types of conditions,” explained GTT.

“The group remains sensitive to the evolution of the situation and is taking all necessary measures to protect its employees and stakeholders, in compliance with international sanctions,” it concluded.

Shell reported an almost three-fold jump in earnings to $9.1 billion compared with $3.2Bln in the same three months of 2021 as quarterly LNG sales increased along with oil and refined product prices.

Japanese liquefied natural gas imports dropped almost 9 percent in March as cargoes increased from Russia and the US while shipments from the Middle East and Asia declined at the same time as Japan’s thermal coal deliveries skyrocketed by over 25 percent.

UK major Shell plc said it intended to withdraw from involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas in a phased manner, aligned with new government guidance.

The now London-based company said that as an immediate first step, it would stop all spot purchases of Russian crude oil and would close its filling stations as well as jet fuel and lubricants operations in Russia.

The latest Shell statement follows last week’s moves to end involvement in the Nord Stream II natural gas pipeline project and to exit its equity partnerships with Russian gas giant Gazprom and related entities.

These included ending its 27.5 percent stake shareholdings in the Sakhalin-II LNG export facility in the Russian Far East, its 50 percent stake in the Salym Petroleum Development and the Gydan energy venture.

“We are acutely aware that our decision last week to purchase a cargo of Russian crude oil to be refined into products like petrol and diesel - despite being made with security of supplies at the forefront of our thinking - was not the right one and we are sorry,” declared Shell Chief Executive Ben van Beurden.

“As we have already said, we will commit profits from the limited, remaining amounts of Russian oil we will process to a dedicated fund,” he added.

“We will work with aid partners and humanitarian agencies over the coming days and weeks to determine where the monies from this fund are best placed to alleviate the terrible consequences that this war is having on the people of Ukraine,” stated Van Beurden.

Discussions

Shell also explained that its actions to date had been guided by “continuous discussions with governments” about the need to disentangle society from Russian energy flows, while maintaining energy supplies.

The company said that threats to stop pipeline flows to Europe further illustrated the “difficult choices and potential consequences” that are being faced.

Shell plans to immediately stop buying Russian crude oil on the spot market and we will not renew term contracts.

“At the same time, in close consultation with governments, we are changing our crude oil supply chain to remove Russian volumes,” said the company.

“We will do this as fast as possible, but the physical location and availability of alternatives mean this could take weeks to complete and will lead to reduced throughput at some of our refineries,” it added.

Shell is now implementing a “phased withdrawal” from Russian petroleum products, pipeline gas and LNG.

“This is a complex challenge. Changing this part of the energy system will require concerted action by governments, energy suppliers and customers, and a transition to other energy supplies will take much longer,” it stated.

Van Beurden also declared that ultimately, it was for governments to decide on the “incredibly difficult trade-offs” that must be made during the war in Ukraine.

“We will continue to work with them to help manage the potential impacts on the security of energy supplies, particularly in Europe,” the CEO concluded.

Shell, the global oil and gas major, said it was ready to consider future participation in a new liquefied natural gas project in Russia as the company sees growth potential in supplying more natural gas to satisfy increasing demand in Asia.

The Gazprom-run Sakhalin liquefied natural gas export plant in the Russian Far East has started maintenance work and has shut down one of its processing Trains.

Sakhalin Energy, the plant operating company, had originally planned for work to be done on both Trains at the same time, but logistical difficulties occurred caused by the Covid-19 pandemic and resulting safety measures.

The main buyers of Sakhalin cargoes are Japanese, South Korean and Chinese energy companies.

The shareholders in the plant are Gazprom with 50 percent plus one share, Royal Dutch Shell with 27.5 percent and Japanese companies Mitsui and Co. and Mitsubishi Corp. with 12.5 percent and 10 percent respectively.

Under its new plans some scheduled maintenance work has now been postponed until 2021.

“Due to current economic downturn and the pandemic challenge, we had to modify the initial turnaround scope,” said a Sakhalin Energy statement.

“To ensure the safety of our people and reliable production, the company has decided to follow the original timeline, but shut down only one Train at the LNG plant,” the company added.

LNG production at the two-Train Sakhalin plant has remained at just over 11 million tonnes per annum in recent years. The plant was Russia's first and came on stream in 2009.

The newer Yamal LNG plant started up in 2017 with output of 16.5 MTPA from three Trains and is operated by independent Russian natural gas company Novatek.

A long-planned expansion at the Sakhalin plant and the construction of a third liquefaction Train has so far failed to take place.

However, Gazprom notes that regular de-bottlenecking and equipment adjustments over the past 11 years has seen output raised to more than 11 MTPA from the nameplate capacity of 9.6 MTPA.

LNG cargoes produced and marketed at Sakhalin are supplied on a free-on-board basis and shipped by the company’s LNG carriers, “Grand Elena”, “Grand Aniva” and “Grand Mereya”.

Two other vessels, the “Amur River” and the “Ob River” carriers are used by the company under long-term charter agreements.

Novatek, operator of the Yamal LNG plant and lead developer of the Arctic II LNG project, has signed an agreement with Japanese shipping company Mitsui OSK Lines to cooperate on the construction of LNG trans-shipment stations on the Kamchatka Peninsula in the Russian Far East and near the Barents Sea port of Murmansk.