Foreign engineers will play a big role in planning Russia’s second Arctic LNG project

The Arctic LNG 2 planned for the shallow waters of the Gulf of Ob, the bay located near the coast of the Kara Sea between the peninsulas of Yamal and Gydan will be Russia’s second major liquified natural gas project in the remote and inaccessible Arctic.

The project will make Novatek, the Russian natural gas company, one of the world’s biggest producers of LNG. The company already runs the Yamal LNG project, which was officially launched in December 2017.

But Novatek won’t undertake the new project alone. Despite the souring climate in East-West relations and Russia’s growing stress on national capacities, the grand Arctic project leans heavily on the leading European oil and gas development companies.

Company leader Leonid Mikhelson does not conceal his comprehensive project cooperation with leading European companioes. Foreign firms will provide project services, while Russian companies will do the well drilling, he told Russian news agency TASS.

In May 2017, Novatek signed a framework agreement with Technip and Linde, the French and German engineering firms. Following Technip’s merger with FMC Technologies in 2017, additional teams of Norwegian and British engineers might be taken on board.

Novatek will use Linde’s technology on natural gas liquefaction for the Arctic project, and has purchased the necessary license from the Germans.

In addition, the Russians are teaming up with the Italian company Saipem for the development of the gravity-based structure (GBS), the installation which is to be based on the seabed on the Ob Gulf. A representative of NIPIGAZ, a partner of Novatek, confirmed to Reuters that the Italians are in the process of getting the job.

Saipem and Novatek already in 2016 signed a strategic partnership deal which included “joint exploration of opportunities for mutual cooperation in future LNG projects.” Still, the Italians were not included in the LNG Novaengineering (SPG Novoinzhiniring), the joint venture established in May 2017 to lead the development of the project. In the consortium are Linde, TechnipFMC and NIPIGAZ.

Saipem might also get other key responsibilities. According to Novatek leader Mikhelson, the Italian company might be included as partner in the development of the Kola Yard, the plant on construction of project modules, currently under development outside Murmansk City. Partnership talks over the Kola Yard are in the progress also with two other companies, Mikhelson told TASS.

The Arctic LNG 2 is to be ready for production by early 2023. It will be based on three project trains each with a production capacity of 6,1 million tons. Natural gas resources are based on the nearby Salmanovskoye and Geofizicheskoye fields, and possibly also field like the Gydanskoye, East-Tambey and North-Ob.

The seabed in the area is to be cleaned free of rocks and cracks filled with concrete, Neftegaz informs. Then, subsequently, the gravity-based structure (GBS) will be placed on site. The structure will be built at the Kola Yard and towed across the Barents Sea and Kara Sea to the Gulf of Ob.

The project’s Front End Engineering Design (FEED) is reportedly to be ready by late 2018 and a final investment decision taken before the end of 2019.

With the Arctic LNG 2, Novatek will boost its annual production of LNG to more than 34 million tons. That liquified natural gas will all be shipped out through Northern Sea Route, some of it eastwards to Asian buyers.