Russia looks to overtake Qatar with $27bn LNG project

President Vladimir Putin on Friday launched a $27 billion liquefied natural gas plant in the Siberian Arctic as Russia hopes to surpass Qatar to become the world’s biggest exporter of the chilled fuel.
“This is a large-scale project for Russia,” Putin said at the official ceremony in the port of Sabetta on the Yamal peninsula beyond the Arctic Circle.
The centerpiece of the event was the loading of the first gas shipment onto an icebreaking tanker from the Yamal LNG plant, with temperatures of minus 28 degrees Celsius outside.
For the project, Russia’s privately owned gas producer Novatek partnered with France’s Total and China’s CNPC.
The tanker that will carry the first shipment was named after Christophe de Margerie, the former Total CEO who died in an accident on the runway of a Moscow airport in 2014.
White whiskers have been painted on it in honor of the late CEO, who was known for his white bushy moustache.
“I congratulate you all on the first loading of the cargo tanker which is named after our friend Christophe de Margerie,” Putin said, praising him as “one of the trailblazers for this project.”
“At the start of the project, people told me not to pursue this. Those who started this project took a risk but achieved a result,” Putin added, thanking the project’s international participants.
“Without their participation, without them trusting their Russian friends, this project would not have got off the ground — this concerns both the financing and the technology.”
The $27 billion project is set to start with a production capacity of 5.5 million tons per year and increase to 16.5 million tons by the start of 2019.
“Without a doubt Russia not only can but will become the largest producer of liquefied natural gas in the world,” Putin said in March.
“We have everything for it.”
Qatar is currently the world’s biggest exporter of liquefied natural gas.
Russia, the world’s biggest gas exporter, derives a huge share of income from pipeline deliveries to Europe.
With Yamal LNG, the country intends to strengthen its market presence in Asia and demonstrate its capacity to exploit huge Arctic reserves despite major technological challenges.
Dmitry Monakov, the project’s first deputy director, said that producing LNG in permafrost was easier than in warmer climes, an apparent dig at countries like Qatar.
“Nature itself helps us to more effectively liquify gas with the help of such low temperatures,” he told AFP, adding that the plant effectively sat on a gas field so transportation costs were low.
Patrick Pouyanne, Total chairman and CEO, praised the project’s “remarkably low upstream costs.”
“Together we managed to build from scratch a world-class LNG project in extreme conditions to exploit the vast gas resources of the Yamal peninsula,” he was quoted as saying in a company statement.
Despite the project’s completion, Yamal LNG still faces risks, analysts said.
Lussac of Wood Mackenzie said that the coming months will show “whether the plant can operate smoothly in the harsh Arctic environment.”
Transportation through the Northern Sea Route also remains undeveloped, and “its feasibility as a major LNG delivery route is unclear,” he added.
Russia hopes the route will become an easier path to coveted Asian markets, with the LNG project contributing to understanding of how to navigate the Northern Route.
The route along the northern coast of Siberia allows ships to cut the journey to Asian ports by 15 days compared with the conventional route through the Suez Canal, according to Total.