Russian Oil and Gas Industry: News #2

Russia’s Oil Giant Lukoil Plans $100B Investment Over Ten Years

Russia to go it alone on construction of Nord Stream 2 pipeline

Russia has said it will complete construction of the controversial Nord Stream 2 gas pipeline under the Baltic Sea without the help of foreign companies, marking a victory for the US which imposed sanctions in an attempt to halt the project.

Tuesday’s admission by Gazprom, the Kremlin-controlled gas monopoly, is the first official acknowledgment that Moscow will complete the pipeline, which runs from Russia to Germany, without foreign involvement.

“The Nord Stream 2 project, which is already 94 per cent complete, will be finished by the Russian side,” Gazprom’s deputy head Elena Burmistrova said at the European Gas Conference Vienna.

Washington imposed sanctions last month against companies involved in the construction of the Nord Stream 2 as part of efforts to punish Moscow for alleged meddling in the 2016 US presidential elections. The Trump administration also voiced fears that the pipeline would increase Europe’s dependency on Russian energy.

Gazprom and five EU energy companies are paying for the Nord Stream 2, which was being laid by international contractors, who suspended their work on the project when the US sanctions were announced.

Critics say the pipeline is designed to reroute gas supplies to Europe that are currently sent through Ukraine, depriving Kyiv of lucrative transit revenues. Russia says it is a purely commercial venture.

“Half a century ago, when pipelines to Europe were being built, no one could think they would be torn by political disagreements,” Ms Burmistrova said on Tuesday, pointing out the approaching 50th anniversary on February 1 of the “legendary” deal between Germany and the Soviet Union to supply gas in return for pipelines. 

It is unclear how Gazprom intends to finish the project without international assistance. Various options are being discussed, including vessels owned by the gas company and other Russian pipe laying contractors, but none are as modern or advanced as those used by Allseas.

Swiss group Allseas, the main contractor that had been laying the pipeline, immediately suspended operations in the face of US sanctions. Despite Ms Burmistrova’s comments, Nord Stream 2 AG, the fully Gazprom-owned pipeline operator based in Switzerland, on Tuesday insisted that together with the companies supporting the project — Engie, OMV, Royal Dutch Shell, Uniper and Wintershall, all of which have already given it substantial financial investment — it would work on finishing the pipeline.

The 55bn cubic-metre pipeline was initially expected to be launched by the end of 2019, when the previous gas transit contract with Ukraine was set to expire.

Construction work stretched into 2020, however, after a delay in receiving permission from Denmark to build in its waters.

With a new Gazprom-Naftogaz transit contract now in place, Russian officials’ estimates for the completion of Nord Stream 2 now vary from the end of 2020 to early 2021.

Novatek To Order Up To 42 New Arc7 LNG Carriers Totaling $12bn

Novatek shared details about its four planned natural gas projects and announced its intention to place orders for up to 42 ice-capable Arc7 LNG carriers in the coming years. The company will acquire 10 new Arc7 LNG carriers from foreign shipyards, while placing the remaining orders with Russia’s Zvezda shipyard.

With the opening of Novatek’s newest and largest Arctic natural gas project, Arctic LNG 2, just three years away, Novatek’s Chairman of the Board Leonid Mikhelson laid out plans to procure up to 42 specialized Arc7 LNG carriers. Earlier this month the company requested an exemption from the requirement to contract with the domestic Zvezda shipyard for all vessels, due to growing concerns about the timely delivery of the vessels.

It has now received permission to order up to 10 vessels from foreign shipyards. Likely bidders will be South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME), Hyundai Heavy Industry and Samsung Heavy Industry (SHI). China’s Hudong Zhonghua shipyard, a subsidiary of state-company China State Shipbuilding Corporation, is also reportedly vying for the contract offering attractive financing options. DSME constructed the original tranche of 15 Arc7 vessels delivered between 2017-2019 used to export natural gas from Novatek’s first Arctic project, Yamal LNG.

80 million tons by 2030
Novatek has plans to open four new LNG projects on the Yamal and Gydan Peninsulas in this decade. In order of anticipated completion these are Ob LNG, Arctic LNG 2, Arctic LNG 3, and Arctic LNG 1. Construction on Arctic LNG 2, located on the Gydan Peninsula across from Yamal LNG 2, began in 2018. The facility will consist of three LNG trains, or production lines, producing a total of 19.8m tons of LNG annually.

An investment decision on the much smaller Ob LNG project (5m tons), on the Yamal Peninsula, is expected for the second half of 2020, Mikhelson explained. Arctic LNG 2 will feature technology and components provided largely by international companies and suppliers. In contrast, Ob LNG will rely on Novatek’s domestically-developed “Arctic Cascade” technology, which was tested as part of Yamal LNG’s fourth and smallest train.

In addition, Arctic LNG 3 and Arctic LNG 1 are also on the horizon. While the company did not share timelines for investment decisions, exploratory drilling and geological surveys have begun for both projects. Each project will be designed for around 20m tons annually.

A fleet of Arctic tankers
In order to transport in excess of 80m tons of LNG annually Novatek will rely on more than 60 ice-capable Arc7 LNG carriers. In addition, it will shorten the distance these vessels have to sail before off-loading and transferring their cargo by constructing transshipment hubs at each terminus of the NSR, near Murmansk and in the Far East on the Kamchatka peninsula.

Novatek already placed an order for five vessels with the Zvezda shipyard in partnership with SHI at the end of 2019. As Zvezda has little experience constructing ice-capable carriers, the shipyard entered into an agreement with SHI for its technical expertise and for help in optimising hull design to improve performance while sailing in ice along the NSR.

These five vessels are intended to transport natural gas from Ob LNG and also cover excess capacity at Yamal LNG, which produces more LNG than originally planned. Vessels will be delivered by 2023 in time for the anticipated opening of Ob LNG.

Firm orders for the ten Arc7 vessels going to international shipyards can be expected during 2020 with planned deliveries in 2023-2024, aligning with the commissioning of Arctic LNG 2. An order for an additional 15 vessels going to Zvezda will be finalized by March of this year financed by Russia’s largest investment company, VEB. These vessels are presumably slated for service with Arctic LNG 3 and have an anticipated delivery between 2024-2025. Mikhelson highlighted the need for an additional 15-17 ships, which would also be built domestically, before the end of the decade. These would align with the completion of Arctic LNG 1 with deliveries after 2025.

Gazprom delivers first billion square metres of gas via TurkStream

Russian energy giant Gazprom has pumped the first 1 billion cubic metres of natural gas through the new TurkStream pipeline.

About 54 percent of the gas was absorbed by the Turkish market while 46 percent was delivered to the Turkish-Bulgarian border, Gazprom said on Monday.

Russian President Vladimir Putin and his Turkish counterpart Recep Tayyip Erdoğan inaugurated the 930-km long TurkStream pipeline on Jan. 8. It began pumping gas at the start of the year. Capacity is 31 billion cubic meters a year.

The pipeline is seen as a symbol of the close economic and political cooperation between Russia and Turkey, which includes forging partnerships to secure peace agreements in the war-torn Mediterranean countries of Syria and Libya.

The U.S. Senate approved a defence bill last month implementing sanctions for both TurkStream and another pipeline, Nord Stream 2, to help “deter Russian aggression”.

China starts to consume Russian gas via “Power of Siberia”

China has started to consume Russian gas via the newly launched “Power of Siberia” pipeline, said CNPC-backed Kunlun Energy Ltd , operator of the pipeline in China, on Wednesday.

The company receives 250,000-300,000 cubic metres of pipeline gas daily from Russia, helping to ease tight gas supply in winter season in Harbin, provincial capital of the north-most region Heilongjiang.

The 3,000-km (1,864 mile) pipeline, launched in December, is expected to transmit 4.6 billion cubic metres (bcm) of natural gas from Russia’s Siberian gasfield to China, rising to 10 bcm in 2021 and by 25 bcm in 2024.

The Race For Arctic Oil Is Heating Up

Despite climate concerns and environmentalist backlash against exploration for oil and gas in pristine sensitive regions of the Arctic, companies continue to explore for hydrocarbon resources in the Arctic Circle, in Russia and Norway in particular.  
The largest Russian energy companies are looking to explore more Arctic oil and gas resources on and offshore Russia, while Norwegian and other Western oil firms are digging exploration wells in Norway’s Barents Sea.

Those companies lead the development efforts to tap more Arctic oil and gas resources as legacy oil and gas fields both offshore Norway and onshore Russia mature.  

Russia’s biggest energy firms Gazprom, Rosneft, Novatek, and Lukoil, and Norway’s oil and gas giant Equinor, as well as Aker BP and ConocoPhillips, are the top oil and gas producers in the Artic region, data and analytics company GlobalData said in a new report. Gazprom is the undisputed leader in Arctic oil and gas production, followed, at a long distance, by two other Russian firms, Rosneft and Novatek, GlobalData’s estimates show.

Russian firms are ramping up exploration in Russia’s Arctic, while Equinor and other Western companies drill exploration wells in Norway’s Barents Sea, hoping for a significant discovery that could add to the Johan Castberg oilfield—a massive discovery which was made in 2011, but which hasn’t been replicated in the Barents Sea so far.  

Yet, both Russia and Norway face specific challenges in getting the most out of their respective Arctic oil and gas resources.
In Russia, the government has made Arctic oil and gas development a key priority and offers tax breaks for firms exploring in the area.

Energy giants Gazprom and Rosneft dominate the exploration and development efforts in Russia’s Arctic. Offshore, Gazprom’s Prirazlomnoye field is currently the only producing Russian oil and gas project on the Arctic Shelf.

But even with tax breaks, Russia may find it hard to develop its offshore Arctic resources, due to the U.S. sanctions banning collaboration on Russian deepwater, Arctic offshore, or shale projects with Gazprom, Gazprom Neft, Lukoil, Surgutneftegas, and Rosneft. These are the largest energy firms in Russia and they don’t have access to capital at western banks to develop such projects. In the wake of the sanctions, many Western oil firms withdrew from joint ventures with Russian companies, which are now left without partnerships in technology needed to explore, drill, and potentially produce and process hard-to-extract oil and gas resources.

Although Russian firms downplay the effects of the U.S. sanctions on their development plans, and although domestic companies are focused on developing in-house technology solutions to replace foreign-sourced tech, analysts believe that 100-percent local content technology in challenging projects would likely take years to implement.

Financing for large onshore projects in the Arctic is not easy either. Rosneft, which wants to develop the Vostok Oil project, to “implement a complex development program for a new oil and gas province in the north of the Krasnoyarsk Territory,” is looking east to gather funding for the US$157 billion project—to Japan, India, and China.

Russia’s largest private natural gas producer, Novatek, is one of the success stories of Arctic resource development. Novatek—which already exports liquefied natural gas (LNG) from the Yamal LNG plant—gave last year the go-ahead to its second LNG project, Arctic LNG 2 on the Gydan Peninsula. Novatek’s partners in the ventures are France’s Total with a minority stake as well as Chinese and Japanese companies.
Last year, Russian officials said that the Arctic area could become the key driver of Russia’s natural gas production in less than two decades, as it has the potential to produce 90 percent of all the gas produced in Russia by 2035.

Norway’s Arctic areas open to exploration are parts of the Barents Sea, where companies are struggling to finally make a large-size discovery after Johan Castberg. Norwegian authorities say that the Barents Sea holds 64 percent of the yet to be discovered resources on the Norwegian Continental Shelf, while the North Sea and the Norwegian Sea each are estimated to hold 18 percent of the undiscovered resources.

Last year, just five wells were drilled in the Barents Sea, fewer than in 2018. In 2019, a total of 17 new discoveries were made offshore Norway, of which only one was in the Barents Sea.

Norway’s Equinor says that it continues to explore in the Barents Sea because more oil will be needed in the world just to maintain supplies.

“Discoveries in the Barents Sea can lead to significant economic development, nationally and locally. Based on our understanding of the geology, we hope to find high quality light oil that’s in demand—and better for the climate. The wells we drill in the Barents Sea are cheaper than many others, thanks to the geology and shallower waters,” says the Norwegian giant.

In 2020, Equinor will focus on exploration in the western part of the Barents Sea, Tim Dodson, Executive Vice President, Exploration at Equinor, told Reuters in November.

Norway and Russia are leading Arctic oil and gas development, but they both face challenges in making the Arctic the next oil hotspot.  

OMV does not expect early resumption of Nord Stream 2 construction

MOSCOW, February 6. /TASS/. Austria’s OMV, which is a partner of Gazprom in the Nord Stream 2 project, does not expect a quick resumption of works to complete the construction of the gas pipeline, OMV CEO Rainer Seele told a conference call on Thursday.

"The Nord Stream 2 pipeline placement company is working on the plan but so far they are not ready to present that plan, so we do not believe there will be a short term resumption of the pipeline work," Seele said responding to a question how soon the work on the project will be resumed.

Nord Stream 2 is an international project for the construction of a gas pipeline that will run across the bottom of the Baltic Sea from the Russian coast to Germany bypassing transit states. The new 1,200 kilometer pipeline, basically following the same route as Nord Stream, will traverse economic zones and territorial water of five countries, namely Russia, Finland, Sweden, Denmark, and Germany. The pipeline’s capacity will be 55 bln cubic meters of gas a year.

In late December 2019, US President Donald Trump signed the National Defense Authorization Act (NDAA) specifying the annual budget and expenditures of the US Department of Defense for 2020 fiscal year (started on October 1), which obliges the Administration to impose sanctions on Russia's Nord Stream 2 and TurkStream pipelines. Swiss pipeline laying company All Seas suspended its work on the Nord Stream 2 project in the Baltic Sea.

On February 4, Handelsblatt newspaper reported citing US diplomatic sources, that the US intends to impose new sanctions on the Nord Stream 2 gas pipeline if Russia attempts to complete its construction.

According to the newspaper, European investors or companies desirous to buy gas flowing over the pipeline can be affected this time. Diplomatic sources do not exclude new sanctions can be in force as early as in February or in March.

However, Russia has no doubt that it will be able to complete the Nord Stream 2 project on its own. President Vladimir Putin expressed hope that by the end of 2020 the construction will be completed despite the fact that Gazprom had to postpone the project for several months.

Export results of the Russian fuel and energy sector in 2019: records for oil, gas, coal

Austin wrote:"Russia will be able to make a giant leap"

https://www.gazeta.ru/business/2020/02/11/12955861.shtml

According to Sechin, the resource base of the fields included in Vostok Oil at this stage is about 5 billion tons of oil, and each ruble invested in the project will increase the demand for goods and services produced in the country by 9 rubles.

Hole wrote:

Austin wrote:"Russia will be able to make a giant leap"

https://www.gazeta.ru/business/2020/02/11/12955861.shtml

According to Sechin, the resource base of the fields included in Vostok Oil at this stage is about 5 billion tons of oil, and each ruble invested in the project will increase the demand for goods and services produced in the country by 9 rubles.

15 new towns, 2 Airports, 1 Harbor + lots of pipelines + power stations with 2.000 MW. Sounds like a big infrastructure project. Together with all the Projects under the umbrella of the northern sea route this will transform the russian arctic.

kvs wrote:

Lukashenko has gone full Ukr-level retard.  

He is threatening to siphon Russian oil from pipelines over Belorussian territory.   Supposedly some contract gives him
the right to engage in theft.

Funny how these ass-kissers of the west never quite follow western norms.   You see, if you have contract dispute,
you need to go to court to get your right upheld.   If you take the law into your own hands and steal, then the law
will f*ck you over.

GarryB wrote:When the Ukraine did this the Russians started planning alternative routes for their product... would expect the same if Belarus tries something similar.

Would add that discounts will likely disappear too when the alternative options are available and things don't improve in terms of theft via original lines.

kvs wrote:Luka is "derevnya".   The way he talks shows this.   He is the useful idiot who will be disposed of to facilitate regime change
in Belarus.   I am hoping that the Belorussian majority are not idiots like the Ukrs and get off their asses to counteract any
street theater staged by NATzO.

GarryB wrote:Well a lazy people works both ways... to lazy to stop a NATO colour revolution... also too lazy to stop a Russian colour revolution of their own perhaps... or at least the destruction of anything of value in the country that NATO might find useful...

jhelb wrote:

GarryB wrote:Well a lazy people works both ways... to lazy to stop a NATO colour revolution... also too lazy to stop a Russian colour revolution of their own perhaps... or at least the destruction of anything of value in the country that NATO might find useful...

Revolution on going in South America...colour or no colour, courtesy US government. Most of these Catholic countries are being converted into Protestant countries. The Vatican, the Pope realizes this, yet they do not speak openly about these antics of the US government.

I speak with middle aged Brazilians, Argentinians and other South American nationalities, they tell me they are Catholics but their kids have embraced Protestantism.

A significant number of Latinos/Hispanics who migrate to US convert into Protestantism within a few years.