LNG

The Japan Organization for Metals and Energy Security, a national agency with a stake in the Russian Arctic LNG II project operated by the Novatek natural gas company of Russia, is likely to put Japanese LNG needs over Western sanctions as Japan did when keeping cargo rights from Sakhalin LNG.

“Strengthening mutually beneficial relationships with resource-rich countries is essential for developing oil and natural gas resources,” said the Japanese agency known as JOGMEC.

“As a governmental organization, JOGMEC conducts various projects to support Japan’s resource diplomacy, collaborating with national oil companies and providing technical support for producing countries,” it added in its latest statement on policy.

While Japan like other nations has condemned Russia's invasion of Ukraine it has continued to keep stakes in the Sakhalin LNG plant in the Russian Far East and other energy projects.

Novatek controls 60 percent of the Arctic LNG II project and its other remaining active partners are from China and Japan.

Consortium

They are China National Petroleum Corp., China National Offshore Oil Corp. and a consortium comprising the Japanese trading company Mitsui & Co. and JOGMEC.

Mitsui has said that while it would comply with any sanctions requirements it would take its final guidance from the Japanese Government.

In the case of Russia’s Sakhalin LNG, Japanese companies Mitsui and Mitsubishi maintained their stakes and offtake with the government saying at the time that if Japan ceded its offtake rights they would likely be taken up by China.

Another energy security issue facing Japanese utilities and LNG importers is that Australia could become an unreliable LNG supplier in the future as labor unions begin to exercise control and more hardline policies at LNG plants, readily backed by key members of the governing left-wing and anti-hydrocarbon Labor party.

This action has resulted in a series of strikes and work stoppages at four facilities in Western Australia, raising security of supply concerns in Asia.

Analysts said that crucially the Japanese have a large offtake portion from the Arctic LNG II project on the Gydan Peninsula that is expected to come on stream in early 2024 and they were unlikely to give this up.

Japanese offtake

The Japanese have basic offtake rights from the Gydan venture to 2 million tonnes per annum and could increase that total.

Arctic LNG II will have three liquefaction Trains, each with 6.6 MTPA of capacity.

One of the Trains is already on site after being towed from a construction yard in the Murmansk Region on a gravity-based structure and deployed in the bay where the plant is located.

The biggest Arctic LNG shareholder, Novatek itself, has been signing multiple additional sales and purchase agreements with Chinese LNG players such as the ENN Group and Zhejiang Energy Gas Group.

The ENN SPA stipulates cargoes from Arctic LNG II will amount to a total of 600,000 tonnes per annum will be delivered over a term of 11 years.

LNG deliveries to ENN will be on a ex-ship (DES) basis whereby Novatek supplies the shipping to ENN’s Zhoushan LNG receiving terminal in eastern China. 

Novatek, the Russian natural gas company and operator of the Yamal LNG export plant and developer of Arctic LNG II currently under threat from Western sanctions imposed because of the Ukraine invasion, said LNG cargoes sold on international markets fell in the second quarter.

Japanese companies have begun moving towards imposing sanctions together with the US, the European Union members and other nations and targeting the sensitive areas for Japan of oil and liquefied natural gas imports after the invasion of Ukraine by its neighbour Russia.

Novatek, the operator of the Yamal LNG plant and developer of the Arctic LNG II project, said the first three stages of international certification have been obtained for long-term carbon-dioxide underground storage sites on the Yamal and Gydan peninsulas in northern Siberia.

Novatek, the developer of the Arctic LNG II project on the Gydan Peninsula in Northern Siberia, has signed new supply agreements with units of two Chinese companies, the ENN Group and Zhejiang Energy Gas Group.

Two liquefied natural gas LNG carriers, the “Boris Davydov” and the “Rudolf Samoilovich” after safely completing the final leg of their East-West voyages on the Northern Sea Route which has become ice-bound earlier in the 2021-2022 winter season.

“Two LNG carriers Boris Davydov (in the Laptev Sea) and Rudolf Samoilovich (in the East Siberian Sea) continue their voyages to the port of Sabetta without ice-breaker support,” said the NSR information office.

The 172,000 cubic metres capacity “Boris Davydov” was due to berth on November 25 at the Novatek-operated Yamal LNG export plant at Sabetta in northern Siberia.

The vessel had previously delivered an LNG shipment to the Chinese port of Jiangsu, according to the Russian NSR data.

The “Rudolf Samoilovich” was also heading for Sabetta and is scheduled to arrive on November 27. The ship had last visited the Russian Far East port of Nakhodka, though had delivered a shipment of LNG to the Tangshan terminal in the Caofeidian Industrial Zone of Hebei province.

Speed

“At the time of the report, their speed was 16-18 knots,” added the NSR body.

However, another vessel, the “Mechanic Pustoshnyy”, is drifting in the Laptev Sea, and a second ship, the “Mikhail Somov”, is adrift in the western part of the Vilkitskiy Strait.

The report concluded that in the western part of the NSR, the icebreaker “Yamal” finished the escorting of the ships “Yurii Arshenevskiy” and “Vitus Bering” at Cape Zhelaniya.

The Yamal plant is the focus of NSR energy shipping activity. It has three liquefaction Trains on stream, each with nameplate capacity of 5.5 million tonnes per annum, as well as a smaller fourth Train with 900,000 tonnes of output, taking overall production to 17.4 MTPA.

All the LNG vessels serving Yamal LNG are around 172,000 cubic metres capacity and have ice-class Arc7 notation.

The Arc7 design allows ice-class LNG carriers to break through ice that is up to 2 metres thick.

The Russian shipbuilding company, Zvezda Shipbuilding, is building a series of 15 next-generation Arc7 ice-class LNG vessels for Russian natural gas company Novatek’s Arctic LNG II project under construction on the Gydan Peninsula in the same region as the Yamal facility.

These newbuild Arc7 LNG vessels have increased ice-breaking and manoeuvring characteristics compared with the existing fleet used by the Novatek-operated Yamal LNG project.

The 15 carriers will be registered and flagged under the Russian Federation and operated by the Russian crew when delivered. 

Novatek, the operator of the Yamal LNG plant in Arctic Russian and developer of the Arctic LNG II joint venture, has won the auctions for two subsoil licence areas, including the Arkticheskoye and Neytinskoye gas fields on the Yamal Peninsula in the Yamal-Nenets Autonomous Region of Northern Siberia.

Novatek’s bidding was carried out by the wholly owned subsidiary Yamal LNG Resources.

The Arkticheskoye and Neytinskoye fields have combined estimated hydrocarbon reserves of 2.9 billion barrels of oil equivalent, including 413 billion cubic metres of natural gas and 28 million tons of liquids, according to the Russian hydrocarbon classification system.

The licence terms are for 27 years and resulted in cumulative one-time payments for the subsoil use of 13.15 billion Russian roubles ($180 million).

“The new licence areas are located in close proximity to Novatek’s existing assets on the Yamal Peninsula and expand the company’s resource base for implementing LNG projects,” said Novatek.

The current Yamal LNG feed gas comes mainly from the South Tambey (Tambeyskoye) gas field, located near the port of Sabetta on the Yamal Peninsula.

South Tambey contains 72 commercially viable gas layers, including 33 shallow dry gas layers and 28 deeper gas layers. The depth of these layers varies from 900 metres to 2,850m.

This means the new fields to be developed in the future will not need to come in stream for about 15 to 20 years to supply Yamal LNG, though another project could be developed from the resources.

Reserves

The South Tambey field’s estimated reserves stand at 44 trillion cubic feet of gas and 550 million barrels of condensate, while the proven reserves stand at 1.26 Tcf of gas and 51.6MT of gas condensate.

South Tambey is capable of producing up to 27 Bcm of natural gas a year over 20 years.

A total of over 200 directional production wells are planned to be drilled for the full development of the field.

Novatek’s upstream activities and LNG projects are concentrated mainly in the prolific Yamal-Nenets region, which is the world’s largest natural gas producing area, accounting for around 80 percent of Russia’s gas output.

The existing Novatek Yamal LNG facility has annual output of over 18 million tonnes power annum

The company also expects that all three liquefaction Trains at the Arctic LNG II plant will come on stream on the Gydan Peninsula in a two-year time span from 2023.

The start-up of the first Arctic LNG II Train is planned for 2023, the second in 2024 and the third Train in 2025.

Arctic LNG II will produce 19.8 million tonnes per annum of LNG from the principal feed-gas resources, the Utrenneye gas fields.

The new Arctic plant involves the installation of three gravity-based structures in the Gulf of Ob and related LNG storage facilities of a combined 687,000 cubic metres capacity.

Novatek is the largest independent natural gas producer in Russia and is second only to Gazprom.

The Arctic LNG export project under construction on the Gydan Peninsula in northern Siberia will benefit from a new airport that as just come into service to speed-up the transportation of material and engineering personnel to the work sites.

May 17 (LNGJ) - The LNG carrier “Vladimir Rusanov”, with 172,000 metres capacity, was berthing on May 17 with a cargo to discharge at the Isle of Grain LNG import terminal, operated by National Grid Plc on the Medway-Thames estuary 45 miles southeast of London. The shipment, lifted on May 10 from the Yamal plant in the Arctic region of northern Siberia, is arriving in the UK as the National Balancing Point (NBP) natural gas price rose on May 17 to a record 2021 level of $9.70 per million British thermal units.

Russian natural gas company and liquefied natural gas developer Novatek said it won an auction for exploration and production rights in the North-Gydanskiy licence area located in the Yamal-Nenets Autonomous Region of the Gydan Peninsula and partly in the shallow waters of Gydan Bay in the Kara Sea.

“The North-Gydanskiy licence area has estimated hydrocarbon resources of 9.8 billion barrels of oil equivalent according to the Russian resource classification system,” said Novatek.

The licence term is 30 years and the auction resulted in a one-time payment for the licence of 775.4 million Russian roubles ($10.3M) by Novatek.

“The new licence area borders Novatek’s existing assets on the Gydan Peninsula and expands the company’s resource base for implementing new LNG projects,” explained the company.

Novatek owns the existing Yamal LNG export plant and is constructing the Arctic LNG project on the Gydan Peninsula.

Arctic LNG II will produce 19.8 million tonnes per annum of LNG as well as gas concentrate from the principal feed-gas resources, the Utrenneye gas fields, adding to the existing Yamal facility’s annual output of 17.5 MTPA.

The Russian company holds 60 percent of the Arctic LNG II project and four other 10 percent stakes are shared between various shareholders.

The 10 percent holdings belong to French major Total, which is also a shareholder in the Novatek company, China National Petroleum Corp., China National Offshore Corp. and a Japanese investor group comprising Mitsui & Co. and the government institution, the Japan Oil, Gas and Metals National Corp.

In its most recent earnings Novatek reported declines in annual revenues and profits because of the adverse effects of Covid-19 for much of 2020 and the impact of a weaker Russian rouble.

Novatek said its total gross revenues in 2020, including stakes in joint ventures, dropped by 17.5 percent to 711.8 billion roubles ($9.6Bln), and its gross profits fell 15 percent to 392.0Bln roubles ($5.3Bln).

This was largely due to a decline in global commodity prices for hydrocarbons while Novatek also reported a fall in its own LNG sales volumes on international markets.

Profits attributable to Novatek shareholders came to 169Bln roubles ($2.28Bln), excluding the effects of foreign exchange losses, down from 245.0Bln roubles ($3.3Bln) in 2019.

When counting foreign exchange losses, Novatek’s annual net income came to 67.8Bln roubles ($907 million), even as its output of natural gas increased.

Novatek’s natural gas production including its proportionate share in the production of joint ventures increased by 3.6 percent compared with 2019.

The natural gas output in 2020 amounted to 77.36 billion cubic metres, up from 74.70 Bcm in 2019.

Novatek’s own equity sales on international markets as LNG declined to 8.92 Bcm from 12.79 Bcm in 2019.