Opportunities and challenges for Central Europe’s gas supply
A new opportunity is opening for Central Europe’s energy supply, and within it for its...Comments Off on Opportunities and challenges for Central Europe’s gas supply
What are the major opportunities and challenges for LNG now, and in the near future?
Liquefied natural gas, commonly referred to as LNG has significantly transformed the natural gas industry from a purely regional commodity delivered via pipeline to a global commodity delivered to markets via specialised tankers. LNG is a significant growth opportunity in the natural gas industry as it represents the fastest-growing segment within natural gas as well as “fuel of choice” to transition the world from coal to clean-burning natural gas as part meeting climate change initiatives globally.
This creates enormous opportunities for sponsors, like NOVATEK, to invest capital into large-scale LNG projects to meet the growing demands of natural gas and deliver affordable, secure and sustainable, but there are many challenges facing the industry as a project delays, cost overruns have plagued many projects, and today, low commodity prices will negatively Influence final investment decisions. We are optimistic that the current supply/demand imbalance will correct in the near term, but LNG spot prices will remain depressed albeit some price recovery during the peak winter season.
What are the main routes of NOVATEK’s cargos currently?
We deliver LNG cargos both eastbound to the Asian Pacific markets and westbound to Europe depending on our ability to use the Northern Sea Route during the seasonal navigational period. Since inception, Yamal LNG has delivered over 310 cargos for more than 22 million tons. Our natural gas molecules are consumed in more than 26 countries, so I would that we have been successful demonstrating the commercial efficacy of Yamal LNG.
At the same, we successfully launched our medium-scale Cryogas-Vysotsk project in northwest Russia, which serves the LNG needs of the Baltic and Scandinavian regions.This project essentially fulfils some of the Region’s bunkering requirements as IMO 2020 approaches, as well as LNG supplies for small users and modal transport. We will eventually link this projects LNG output with our LNG terminal project I the port of Rostock, Germany.
How do you see the competition between pipeline and LNG in Europe?
Frankly, we do not see this distinction as competition for one supply source in the form of pipeline deliveries versus another source delivered in the form of LNG. Natural gas is a fungible product. What is important is our ability to deliver natural gas to the market cost competitively. This fact is crucial to buyers. With the construction of more LNG regasification terminals in Europe, this broadens the consumers’ choice to source gas from multiple sources and this creates market liquidity. Our goal should be to deepen the penetration of natural gas in the total energy mix irrespective of the mode of delivery.
FID was made on Arctic LNG 2 project recently. What is the timing of the project and what will be the impact on the global LNG market?
Yes, you are correct. We announced the FID on the 4 September at the Eastern Economic Forum in Vladivostok after concluding our partner consortium over the summer. As of today, Arctic LNG 2 is the largest LNG project to announce an FID in 2019 with a total nameplate capacity of 19.8 million tons per annum. The consortium includes Total, CNPC, CNOOC and Mitsui/JOGMEC at 10% each, with NOVATEK retaining the remaining 60% participation interest in the project.
It is a large-scale LNG project located on the Gydan peninsula in the Arctic region of Russia, and is approximately 70 kilometres east of the Yamal LNG project across the Ob River. The prolific Utreneyye field containing around two trillion cubic meters of natural gas under the Russian reserve methodology will feed natural gas into the gravity-based platforms. Conceptually different from Yamal LNG, the gravity-based platforms will house all of the main liquefaction equipment, compressor and turbines, power, storage and loading arm, which will be stationed about 500 meters from the shoreline. Arc7 type ice-class LNG tankers will load LNG from the GBS platforms and deliver LNG cargos to our future transhipment terminals in Murmansk (westbound) and Kamchatka (eastbound).
We plan to launch the first and second GBS platforms in 2023 and 2024, respectively, and the third GBS platform launched in 2026. Arctic LNG 2 will be part of the “second wave” projects expected to meet the projected demand requirements in mid-2020; however, the project’s ability to deliver cost-competitive LNG to most consuming markets in a secure and sustainable manner as well as redefining the concept of an LNG project using innovation and technology to build the GBS platforms will ultimately define its impact on the global LNG markets.