Russian hydrocarbon (Oil and Gas and Coal) Industry: News #4

Russian gas has been remarkably popular in Europe over the past decade, with its share of demand rising as high as 39% (including sales of both pipeline gas and LNG).

However, it has been clear to the Kremlin for some time that this would be unsustainable over the long term due to the impact of the Energy Transition, with the EU leading the world in announcing aggressive decarbonisation objectives, as seen most recently in its “Fit for 55” package.

Not surprisingly, the Chinese parties negotiated from a position of strength and got a very good deal on the price.

Although it is unclear how rapidly Europe can fully diversify away from buying gas from Gazprom,

Russia needs oil, petroleum product reservoirs with capacity of 140 mln tonnes amid sanctions pressure - experts

MOSCOW. Aug 18 (Interfax) - Creation of strategic reservoirs for liquid hydrocarbon storage should be a task for state energy policy amid changed conditions of trade relations between countries, experts of the Union of Oil and Gas Producers of Russia and CDU TEK have said in an article published in the "Gas Industry" journal.

"As of today, it is necessary, based on Soviet and world experience, to consider the possibility of creating oil reservoirs with a volume of about 140 million tons and similar ones for petroleum products. In terms of organization and technologically, this should be a distributed system tied to transport infrastructure and using the method of storage in rock salt deposits," the article reads. Among its authors are Gennady Shmal, head of the Union of Oil and Gas Producers, and Rishat Shagislamov, project director of the Department of Oil, Gas, Coal and Peat Production and Transportation at CDU TEK.

Now, with a number of foreign companies refusing to buy Russian oil, "the absence of a system of liquid hydrocarbon storage facilities seems to be a serious strategic omission of the domestic oil and gas complex," the article says. The existence of a strategic oil reserves, according to the authors, "allows for strengthening the country's geopolitical position and resisting such pressure."

The experts suggest building strategic tank parks in the Perm Territory, Kalmykia, the Far East and the Volga Region using enterprises with state participation and involving investors from among the largest domestic energy companies. In their opinion, this model will allow to react flexibly to possible problems, including the need to incur large capital expenses with long payback periods.

The reservoirs to be created could be divided into state strategic oil reserves and storage capacity which would be used for commercial purposes to work with traders.

"The system should provide for the distribution of capacity between the port zones of the main export vectors, with an emphasis on the eastern direction, and the zones of the main volumes of processing and production of various oil products in order to balance the operation of oil and gas processing and oil and gas chemical complexes," the authors of the article also said.

A proposal to create underground oil storage facilities was actively discussed in 2020, when coronavirus-related restrictions led to a decline in demand and a drop in oil prices. The discussion took a new turn in March 2022, amid a boycott of Russian crude. Earlier, experts of the Russian Gas Society (RGS) stated that the optimal volume of reserve is 10-20% of annual production [about 55-100 million tonnes based on oil production in 2019]. According to their estimates, it takes 10-12 years to create such storage from scratch, but if this is done on the basis of depleted fields, it is possible to meet the deadline in 3-5 years.

Europe Splurges on Russian Oil As EU Ban Nears

Poland refused to supply crude oil to a refinery in the German city of Schwedt to compensate for Russian energy imported through the Druzhba pipeline. This is reported by the Financial Times, citing a company employee.

The newspaper indicated that the refinery was exploring the possibility of deliveries through the Polish port of Gdansk, but the source indicated that Warsaw was not happy with this, since the Russian company Rosneft owns 54 percent of the refinery’s shares.

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LNG from Yamal for India stuck in geopolitics: Germany found reasons not to supply

Am I reading this correctly that Germany basically stole the cargoes from Yamal LNG which were destined for India?

How can Russia and India allow this?

NOVATEK will no longer be able to supply gas to the former structure of Gazprom

Moscow, August 24 - IA Neftegaz. RU. Novatek's Yamal LNG project can no longer supply gas under a contract with Gazprom's former structure, Gazprom Marketing & Trading Singapore (GM&T Singapore), from August 23, Kommersant reports.

Now this company is controlled by the German authorities - it was de facto nationalized after the start of Russia's special military operation in Ukraine.
On May 11, the Russian government banned interactions with GM&T structures and its parent company Gazprom Germania (now called Security Energy for Europe), but granted Yamal LNG a special exemption for 90 days.
The permit allowed NOVATEK's Yamal Trade structure to continue deliveries of liquefied gas from Yamal to GM&T Singapore under a long-term contract of 3 million tons (gas was transferred in Belgian Zeebrugge).
At that time, GM&T still had the opportunity to fulfill its long-term contract, concluded with the Indian GAIL in 2015, for the supply of 2.5 million tons per year of LNG.
Thus, Russia tried to avoid a situation in which India would lose supplies under a long-term contract.
However, the new management of GM&T Singapore did not allow these plans to come true and in June it stopped shipping Russian LNG to GAIL.
As Bloomberg reported in July, GM&T Singapore had missed 5 scheduled LPG deliveries to GAIL so far.
After India complained about this, Yamal LNG stated that it was fulfilling all obligations to the former Gazprom structure.
However, it was more profitable for the new owners of Securing Energy for Europe (SEFE) to sell LNG on the spot market, rather than supply it to GAIL under a long-term contract, where prices are pegged to oil.

According to Kommersant's information, the long-term contract formula assumed a curve level of 13.7% to JCC (Japanese Crude Cocktail, the average price of Japanese imported oils) plus fixed costs of $0.5/MBTU.
Thus, in June this gas under a long-term contract cost about 535 USD/1000 m 3, while on the spot market - more than 2 thousand US dollars / 1000 m 3 .
The almost fourfold price difference allowed SEFE to pay GAIL a penalty for under delivery and still make money.

The lack of LNG supplies from Yamal forced India to limit gas supplies to domestic consumers.
Reuters sources reported in early August that GAIL cut supplies of raw materials to fertilizer producers and industrial enterprises by 10-20%.
In addition, the state-owned company had to reduce the load at its petrochemical complex in Pat by 40% in order to save about 6.5 million m 3 /d for other customers (daily imports under the contract with GM&T Singapore were 8.5 million m 3 ).

The Government of the Russian Federation will allocate only a small part of the state funding requested by the Ministry of Industry and Trade for the project "Breakthrough to LNG Markets"

The Ministry of Industry and Trade of the Russian Federation expected to receive 35 billion rubles from the budget. in 2022-2030, and only 300 million rubles are indicated in the project passport. But there are other sources as well.

Moscow, August 24 - IA Neftegaz.RU. The federal project "Breakthrough to LNG Markets", developed by the Ministry of Industry and Trade of the Russian Federation, will receive only a part of the budget funds requested for it.
This was reported to Kommersant on August 24, 2022 , referring to an updated version of the project's passport published by the Maysky Decree Telegram channel.

The goal of the Breakthrough to LNG Markets project is to provide Russian liquefied natural gas ( LNG ) production projects with domestic equipment and technologies, as well as to guarantee the long-term technological independence of LNG production projects in Russia.
The project provides for R&D, the creation of prototypes and the launch of serial production of equipment.

According to the project passport, the total cost of the program until 2030 is estimated at 89.32 billion rubles, of which:
3.661 billion rubles are provided for the implementation of 18 research projects to create equipment for medium- and large-capacity LNG production,
for the creation of prototypes for 18 types of equipment for medium and large-scale LNG production - 85.659 billion rubles.

Of these, only 300 million rubles will be allocated from the federal budget. (150 million rubles each in 2022 and 2023).
In particular, 100 million rubles are planned for R&D on the creation of equipment for medium- and large-tonnage LNG in 2022, and 50 million rubles for the creation of prototypes. in 2022 and 150 million rubles. in 2023.
All other funds must be attracted from extrabudgetary sources.
The Ministry of Industry and Trade of the Russian Federation expected to receive 35 billion rubles from the budget. in 2022-2030, and attract the rest through investments from equipment manufacturers.

The updated project passport states that already in 2022 the share of Russian LNG equipment of plants based on Russian LNG technology is 40%, while in the previous version, the Ministry of Industry and Trade expected to achieve this goal only by 2024.
At the same level, the indicator will remain until 2027, in 2028 it should grow to 60%, and by 2030 - up to 80%.

The Ministry of Industry and Trade of the Russian Federation expects that Russian enterprises will master the production of 18 types of equipment for medium- and large-tonnage LNG production by 2030.
The list of priority areas for the development of equipment for medium- and large-tonnage LNG production includes:
submersible sealed LNG export pump,
cryogenic ball valve,
membrane element of the primary barrier for LNG storage and transportation systems,
boil off gas compressor,
liquid expander,
thermal insulation panel for LNG storage and transportation systems,
direct diesel driven sea water fire pump,
air cooler,
gas turbine waste heat recovery unit using organic heat carriers,
a line of technological centrifugal pumps of types BB3, BB5 and VS1/VS6 according to API 610 / GOST 32601 for large-capacity LNG production,
cryogenic butterfly valve,
expander-compressor unit of high power (up to 8 MW),
electrically driven feed gas booster compressor of high power (>35 MW),
cold block of a cryogenic air separation unit with a hermetic casing,
spiral-wound cryogenic heat exchanger for large-capacity LNG production,
terminal arm for shipment of LNG, condensate and removal of boil-off gas,
piping parts made of carbon and stainless steel according to ASME,
compressor unit of refrigerant systems for high power turbines.

The updated passport notes that in 2021 state support was provided for the development of LNG equipment for a total of 964 million rubles. in the following areas:
Konar - development of a sea water pumping unit for fire fighting,
Logicroof Plant - development of thermal insulation panels for membrane storage and transportation LNG tanks,
Kazankompressormash - development of a boil-off gas compressor,
OKBM Afrikantov (part of Rosatom) - development of liquid expanders.
In 2021, at the site of NIIEFA (part of Rosatom), with the support of the Ministry of Industry and Trade of the Russian Federation (subsidy in the amount of 1.35 billion rubles under the state program "Industrial Development and Increasing its Competitiveness") , a bench complex for testing LNG equipment was put into operation . In December 2021, testing of an LNG export pump manufactured by OKBM Afrikantov, created with government support, began. The Ministry of Industry and Trade of the Russian Federation told Kommersant that the Breakthrough to LNG Markets project is being implemented in accordance with the plan. With the support of the ministry, 7 out of 18 projects are being implemented, the list of which was compiled by NOVATEK and Gazprom. The remaining 11 are planned to be supported by the end of 2022.

Prototypes have already been created in a number of areas, in particular, Afrikantov OKBM has successfully tested an LNG unloading pump for the NOVATEK Arctic LNG-2 project.
By Decree of the Government of the Russian Federation of August 17, 2022 No. 2289-r, the Ministry of Industry and Trade of the Russian Federation is allocated budget allocations in the amount of 1 billion rubles from the government reserve fund in 2022. to provide subsidies to Russian organizations for financial support of R&D costs for the implementation of projects under the Breakthrough to LNG Markets program.
It is noted that in 2022, at least 2 billion rubles are provided for the creation of draft designs for equipment for medium- and large-capacity production of liquefied natural gas, taking into account the sale until 2028 of the equipment produced within the framework of the created sketches.

In the future, the Ministry of Industry and Trade of the Russian Federation plans to continue seeking funds to support this direction.
The Ministry of Industry and Trade of the Russian Federation has prepared a draft government decree indexing R&D expenses in the LNG sector when calculating income tax by 1.5 times.
Meanwhile, the industry is requesting more active state support in funding R&D for LNG technologies.
During the SPIEF on June 17, 2022, the head of NOVATEK L. Mikhelson spoke about the need to create a domestic liquefaction technology, which will require a full-fledged localization program provided by the state in full.
According to NOVATEK, the enterprises with which the company is working will need about 24 billion rubles. for R&D.
L. Mikhelson recalled that in 2018-2021. The Government of the Russian Federation approved a number of documents aimed at organizing the production of LNG equipment in Russia, however, all these documents were not supported by funding.

During the construction of the MGP Power of Siberia-2, developments made under the MGP Altai will be used

Gazprom Design is conducting a procurement for engineering surveys for the Eastern Gas Supply System facility, which may be related to the MGP Power of Siberia-2.

Moscow, August 24 - IA Neftegaz.RU. Gazprom is quietly conducting preparatory work for the project of the main gas pipeline (MGP) Power of Siberia-2 (western route of gas supplies to China).

Gazprom Design is conducting a procurement for engineering surveys for the Eastern Gas Supply System facility.
Research will go on 2 objects:
expansion of the UGSS at the section of the CS Aganskaya - CS Volodino,
jumper at the section of the CS Volodino - Irkutsk (section of the CS Volodino - km 3000).
Planned works:
airborne laser scanning,
digital aerial photography,
inspection of points of the state geodetic network,
creation of a frame satellite geodetic network.

Procurement data indicate that the MGP Power of Siberia-2 will duplicate the MGP Altai route in the initial part of its route.
The Altai MGP was originally conceived as a western route for transit-free gas supplies to China from fields in the Yamalo-Nenets Autonomous Okrug (YaNAO).
The planned route of the MGP Altai: the compressor station ( CS ) Purpeiskaya in the Yamal-Nenets Autonomous Okrug - further south through the KhMAO, Tomsk, Novosibirsk regions, Altai Territory and the Altai Republic - crossing the Russian-Chinese border - the territory of the Xinjiang Uygur Autonomous Region of China.
However, the project stalled for many reasons:
the long delivery arm made the transport component expensive for the Chinese in the price of gas, and we know that Gazprom's gas pipelines are frankly not cheap;
negotiations between Gazprom and CNPC dragged on. Even V. Putin could not sign the contract;
protests of ecologists and active Americans, concerned about the fate of the Ukok high plateau (a UNESCO World Heritage Site "Golden Mountains of Altai", a sacred place for Buddhists and Altai pagans, more than 100 burial mounds, an Irbis bird found in the Argut River basin of the Tabyn-Bogdo ridge -Olana Ukoke), the Americans launched a campaign under the motto Keeping Pipelines Off Ukok (Away from Ukok gas pipelines);
the complexity of the project in mountainous areas,
the position of Mongolia, which skillfully promoted the idea of ​​gas transit through its territory.

As soon as clouds of Mongolian shoaling appeared over Baikal, the Russian authorities agreed to change the route of the Power of Siberia 2 MGP .
As a result, a route was chosen with gas transit through Mongolia (continuation of the MGP Power of Siberia-2 on the territory of Mongolia - MGP Soyuz Vostok ).
Advantages for Russia of the Mongolian route:
allows you to lay the track in more flat areas, which simplifies construction;
solves the most important problem, connecting the gas transmission systems of the central part of the country and Eastern Siberia.
The MGP Power of Siberia-2 route is currently being worked out and it was not clear which specific route the MGP Power of Siberia-2 route would go from the YaNAO to the Irkutsk region and whether the developments made under the MGP Altai would be used.

According to the procurement data of Gazprom design, MGP Power of Siberia-2:
in its western part it will coincide by 2/3 with the MGP Altai route, going east to the Irkutsk region from the Volodino CS in the south of the Tomsk region;
then it is possible to pass the route through the territory of the Krasnoyarsk Territory or the Kemerovo Region with further access to the Irkutsk Region;
the gas pipeline will pass through the territory of the Irkutsk region from north to south through the cities of Zima and Sayansk, the city of Cheremkhovo, then through the territory of the Tunkinsky, Kyakhtinsky and Zakamensky districts of Buryatia, approaching the border with Mongolia in the area of ​​the city of Kyakhta.
The issue of signing a long-term contract between Gazprom and CNPC for gas supplies via the Western route remains open.
The western route has been discussed with China since 2006.
In 2015, Gazprom and CNPC entered into an agreement on the main conditions for pipeline gas supplies from Western Siberian fields to China via the western route, but the project entered the plane of substantive negotiations only in 2019.
Gazprom notes that reaching agreements with China is usually not quick, especially since the Power of Siberia-2 gas pipeline will be the longest and most powerful of the 3 gas supply routes to China.
Gazprom is assessing the possibility of delivering gas through the territory of Mongolia in the amount of up to 50 bcm /year of gas.
Whereas the design throughput:
of the operating Eastern route (MGP Power of Siberia-1) is 38 billion m 3 /year of gas (to be achieved in 2024, the plan for 2022 is 15 billion m 3 ),
the upcoming Far Eastern route (MGP Power of Siberia-3) - 10 billion m 3 / year.

owais.usmani wrote:

owais.usmani wrote:https://eadaily.com/ru/news/2022/08/05/spg-s-yamala-dlya-indii-zastryal-v-geopolitike-germaniya-nashla-prichiny-ne-postavlyat

LNG from Yamal for India stuck in geopolitics: Germany found reasons not to supply

Am I reading this correctly that Germany basically stole the cargoes from Yamal LNG which were destined for India?

How can Russia and India allow this?

https://neftegaz.ru/news/partnership/748239-novatek-bolshe-ne-smozhet-postavlyat-gaz-byvshey-strukture-gazproma/

NOVATEK will no longer be able to supply gas to the former structure of Gazprom

Moscow, August 24 - IA Neftegaz. RU. Novatek's Yamal LNG project can no longer supply gas under a contract with Gazprom's former structure, Gazprom Marketing & Trading Singapore (GM&T Singapore), from August 23, Kommersant reports.

Now this company is controlled by the German authorities - it was de facto nationalized after the start of Russia's special military operation in Ukraine.
On May 11, the Russian government banned interactions with GM&T structures and its parent company Gazprom Germania (now called Security Energy for Europe), but granted Yamal LNG a special exemption for 90 days.
The permit allowed NOVATEK's Yamal Trade structure to continue deliveries of liquefied gas from Yamal to GM&T Singapore under a long-term contract of 3 million tons (gas was transferred in Belgian Zeebrugge).
At that time, GM&T still had the opportunity to fulfill its long-term contract, concluded with the Indian GAIL in 2015, for the supply of 2.5 million tons per year of LNG.
Thus, Russia tried to avoid a situation in which India would lose supplies under a long-term contract.
However, the new management of GM&T Singapore did not allow these plans to come true and in June it stopped shipping Russian LNG to GAIL.
As Bloomberg reported in July, GM&T Singapore had missed 5 scheduled LPG deliveries to GAIL so far.
After India complained about this, Yamal LNG stated that it was fulfilling all obligations to the former Gazprom structure.
However, it was more profitable for the new owners of Securing Energy for Europe (SEFE) to sell LNG on the spot market, rather than supply it to GAIL under a long-term contract, where prices are pegged to oil.

According to Kommersant's information, the long-term contract formula assumed a curve level of 13.7% to JCC (Japanese Crude Cocktail, the average price of Japanese imported oils) plus fixed costs of $0.5/MBTU.
Thus, in June this gas under a long-term contract cost about 535 USD/1000 m 3, while on the spot market - more than 2 thousand US dollars / 1000 m 3 .
The almost fourfold price difference allowed SEFE to pay GAIL a penalty for under delivery and still make money.

The lack of LNG supplies from Yamal forced India to limit gas supplies to domestic consumers.
Reuters sources reported in early August that GAIL cut supplies of raw materials to fertilizer producers and industrial enterprises by 10-20%.
In addition, the state-owned company had to reduce the load at its petrochemical complex in Pat by 40% in order to save about 6.5 million m 3 /d for other customers (daily imports under the contract with GM&T Singapore were 8.5 million m 3 ).

GAIL in gas import talks with Russia's Gazprom

State-owned GAIL India and Russia's Gazprom are negotiating over the import of gas to India as the evolving payment mechanism between the two countries facilitate easier trade, said people familiar with the matter. While talks are in the early stages, the cost of these imports could be lower than international prices since Russia has surpluses as its exports to Europe have dwindled.

Saint Petersburg-based Gazprom, the state-owned multinational energy company, has likely proposed to the Indian public sector company that it purchase the fuel from Gazprom Singapore and settle payments in euros in future trades. The Singapore unit is a subsidiary of Gazprom Germania, where the Russian company still has a 'quota' despite abandoning ownership in April, sources said.

It is said to have agreed to pay demurrage charges after failing to deliver shipments to India as part of a long-term gas supply deal. Demurrage refers to the charge that the merchant pays for the use of containers in a terminal beyond the free time period. Traditional Russian banks that engage in oil and gas business globally are now under economic sanctions and barred from using SWIFT, interrupting payment settlements.

SWIFT is the internationally recognised messaging system used for cross-border banking transactions. The system can be skirted if transactions are settled in currencies other than US dollars.

"India should benefit from lower energy prices if we buy LNG (liquefied natural gas) from Russia," said Asif Iqbal, president, Indian Economic Trade Organization (IETO). "Both Gazprom and GAIL are holding discussions on this to figure out broad contours like Singapore route payment settlements. This should also help control domestic price rises by curbing imported inflation."

IETO is facilitating all such negotiations as it's reaching out to all stakeholders in the process.

The US doesn't appear to have too many reservations over India buying oil and gas from Russia as rising consumer prices change economic dynamics across the world.

"The US now wants us to buy fuels from Russia at a cost cheaper than China buys from them," said an executive who met a visiting US diplomat. It's up to India to decide what it wants to do, the person said.

Gazprom has defaulted on the supply of eight cargoes (shiploads) of LNG. Under the long-term deal, Gazprom Marketing and Trading Singapore (GMTS) was supposed to supply 2.5 million tonnes or a minimum of 36 cargoes of LNG to GAIL during calendar year 2022. Russia and India are working closely to develop bilateral transaction platforms. They may soon recognise each other's payment systems-Mir and RuPay. The matter was reportedly discussed during the recent visit of Indian national security adviser Ajit Doval to Moscow.

Both countries are aiming to reach an annual trade volume of $30 billion by 2025 from $13.12 billion in FY22. Lenders from both sides are going to play a crucial role in bilateral trades.

Currently, Russia and India are implementing joint projects in various sectors including energy, oil, defence, pharmaceuticals, food, chemicals, interbank and insurance.

More than 15 Russian banks are in advanced talks with Indian lenders to facilitate bilateral business in their respective local currencies, ET reported on August 22.

The Reserve Bank of India (RBI) had on July 11 allowed invoicing and payments for international trade in rupees, potentially facilitating greater bilateral business with Russia.

Gazprom’s huge gas flare near Nord Stream 1 compression station poses questions

Russian gas giant is said to be flaring over 4 million cubic metres per day of gas, based on assessments of satellite images in July and August

Large scale flaring of natural gas near the Portovaya compressor station, first reported by witnesses at the end of July, has continued throughout August, provoking fresh concerns of potential impact on the local environment.

Satellite images of the area near the station were the subject of analysis by consultancy Rystad Energy, published by UK broadcaster BBC, revealing a large column of gas combustion in the southeastern corner of the Portovaya LNG facility.

The LNG facility is located six kilometres from the Portovaya compression station on a sparsely populated shore of the Finnish Bay, north-west of St Petersburg, and is more visible from the water rather than from the mainland.

The Portovaya compressor station is responsible for raising incoming gas pressure to the point that gas can flow across the Baltic Sea to Germany via the Nord Stream 1 pipeline, without any additional boosting.

The compression station has been operating at just 20% capacity since the beginning of July, with Gazprom citing issues with the maintenance of Siemens Energy-made turbines that are driving compressors.

Gazprom said the compressor station will close between 31 August and 3 September because of turbine maintenance. It was also shut down for 10 days in July, interrupting gas flows to Europe.

Russian energy consultant Mikhail Krutikhin told Upstream that Gazprom is likely to be flaring the excess gas from the incoming pipeline to relieve any potential dangerous build-up of pressure of gas that would normally feed into the compression facility.

Krutikhin said that pressure in the pipeline preceding Portovaya has already been reduced, but the drop has not been sufficient to halt flaring.

Rystad Energy said satellite monitoring showed that the flaring at Portovaya LNG started on 11 July.

In a research note, Rystad said that exact flaring volumes levels are “hard to quantify but are believed to be at levels of around 4.34 million cubic meters per day. This equates to 1.6 billion cubic meters on an annualized basis and is equal to around 0.5% of the EU’s gas demand needs”.

Rystad noted that flaring began on the very same date when Gazprom started maintenance on Nord Stream 1 and continued despite the partial operations being resumed at the pipeline on 21 July.

It concluded that the flaring is “an environmental disaster with around 9,000 tonnes of CO2 being emitted daily”.

Portovaya LNG delays
Though Gazprom has not commented on the cause of the flaring, some industry sources in Moscow questioned suggestions that the Russian gas giant is burning excess gas because of compression restrictions on the Nord Stream 1 pipeline.

Some of these sources have linked the flaring to the ongoing commissioning of the Portovaya LNG facility, which is set to produce 1.5 million tonnes per annum of LNG, without explaining the potential cause of such flaring.

The construction of the Portovaya facility has been managed by Russian contractor Peton since 2016, but commissioning has been already pushed back several times.

The plant has limited storage capacity of 42,000 cubic metres and will pump LNG into a floating storage unit converted from what used to be the Exmar-owned LNG carrier Excel. The 2003-built vessel has storage capacity for 138,100 cbm and was sold by the Belgian company in 2017.

In 2019, Upstream’s sister publication Tradewinds reported that commodity trader Gunvor had chartered this vessel, now known as the Portovyy, to be moored at a loading jetty in the Finnish bay and serve the Portovaya LNG.

Peton has not responded to a request from Upstream to provide information about the status of the commissioning process for the Portovaya LNG.

According to Russian authorities, the Portovaya LNG was intended to provide alternative seaborne supplies of gas to the Russian enclave of Kaliningrad in the event international sanctions halt pipeline gas supplies crossing the Baltic state of Latvia.

The floating storage and regasification vessel Marshall Vasilevsky is supposed to transport LNG from Portovaya LNG to Kaliningrad but marine traffic websites suggest the FSRU has been moored near Kaliningrad since the beginning of February.

Russian government ignores plea to bankroll LNG projects

Kremlin faces possible breakdown in supplies of international equipment to Novatek-led LNG projects as a result of war-related sanctions against Russia

Russian liquefied natural gas projects are facing another major setback in the wake of Western sanctions following Russia’s invasion of Ukraine, with the government apparently unable or unwilling to allocate billions of rubles of funding.

The funds had been earmarked for domestic companies that were asked to supply replacements for Western-manufactured equipment that the sanctions have banned from Russian LNG projects.

Authorities in Moscow have so far agreed to make available just 300 million rubles ($5 million) to finance research and development under an import replacement initiative for 2022 and 2023.

The update has been issued by the Russian Economics Development & Trade Ministry and the report, initially shared in a Russian non-governmental organisation social network channel and seen by Upstream, says that authorities still expect local manufacturers to be able to supply 18 categories of essential equipment for LNG plants in the country by 2030.

If this goal is achieved, it will mean that after 2030, future LNG plants under construction in Russia may source up to 80% of required units and supplies from domestic manufacturers, compared with an estimated 40% today, according to the ministry.

The ministry has estimated that over 89 billion rubles will have to be invested with local manufacturers between 2022 and 2030 in order to reach the declared replacement target, and stressed that almost all financing have to be sourced elsewhere and will not be provided from the Russian federal budget.

In June, Leonid Mikhelson, executive chairman of Novatek, Russia’s largest independent gas producer, suggested that the Russian government would need to disburse 24 billion rubles in short-term financing to several Russian manufacturers in order to to kickstart their R&D efforts for what he described as the first step toward supplying the LNG-related equipment locally on the targeted scale.

First train
Novatek is a leading shareholder in the Arctic LNG 2 project that will feature three LNG processing trains on the Gydan Peninsula in West Siberia, exporting close to 20 million tonnes per annum of LNG to global markets.

The first train for Arctic LNG 2 is almost complete following delivery of all required modules from China to a specialised yard next to the village of Belokamenka near the Barents Sea port of Murmansk and installation on a concrete gravity-based foundation (GBS), a Novatek spokesperson said.

Shipping of modules for the second and third trains from China is on hold however because of the impact of US and European sanctions prohibiting the supply of equipment for new LNG developments.

Arctic LNG 2 trains are based on a floating GBS and will have to be towed from Belokamenka to the Gydan Peninsula for installation and final commissioning.

The first train may remain in Belokamenka until Novatek finds a solution to provide electric power to the facility, after US supplier Baker Hughes reportedly declined to deliver compact LM9000 gas powered turbines to Arctic LNG 2 in order to avoid possible violation of Western sanctions.

An earlier report suggested that Novatek had turned to Turkey’s manufacturer Karpowership to order a floating power plant for the first LNG train instead of reaching out to Russian suppliers.

Karpowership is owned by Karadeniz Holding, one of the world’s largest operators of such power facilities. It owns and operates a fleet of around 20 specialised ships that supply power to projects across the globe, but Novatek, contacted by Upstream, has not confirmed any supply deal yet.

Novatek has not pushed back the deadline of 2023 to start Arctic LNG 2 first train, and hence is thought to be striving hard to avoid any major delay in securing an alternative power supply source for the facility.

TOKYO GAS SIGNS LONG-TERM LNG CONTRACT WITH NEW SAKHALIN-2 OPERATOR

TOKYO, (Reuters) - Japan's biggest city gas supplier Tokyo Gas Co Ltd has signed a long-term contract with a new Russian operator of Sakhalin-2 energy project to buy LNG, a spokesperson for the Japanese company said on August 30.

The main conditions such as volume remained the same as the previous contract, he told Reuters, without elaborating.

The move follows JERA, Japan's biggest power generator, which said last week that it had signed a deal with the new Sakhalin-2 operator to maintain long-term deliveries of LNG.

Russian President Vladimir Putin signed a decree in June taking charge of the project, creating a new legal entity to deal with for buyers and shareholders, which include Shell and Japanese trading houses Mitsui & Co and Mitsubishi Corp. (Reporting by Yuka Obayashi; Editing by Kim Coghill)

ExxonMobil allows filing a lawsuit against the Russian government because of the situation with Sakhalin-1

The time between a company filing a notice of disagreement and filing a claim can vary greatly depending on the contract, but is often between 30 and 90 days.

Moscow, August 31 - IA Neftegaz.RU. American Exxon Mobil Corp. notified Russian officials of its intention to sue the Russian federal government if it is not allowed to withdraw from the Sakhalin-1 PSA project, The Wall Street Journal reports, citing sources.

According to the publication:
Exxon spokesman K. Norton said that the company recently sent a notice of disagreement to the Russian authorities, which is a common pre-trial dispute resolution practice.
It sets a deadline by which the parties must reach an agreement. Otherwise, the case may go to court.
Exxon is taking steps to file a lawsuit, assuming the issue is unlikely to be resolved by the deadline.
The exact date of filing the notification could not be established. The time between a company filing a notice of disagreement and filing a claim can vary greatly depending on the contract, but is often between 30 and 90 days.
The lawsuit is expected to be filed outside of Russia, but lawyers say it could take years to resolve in an international arbitration court.
ExxonMobil on March 1, 2022 announced the recall of its US employees employed in oil and gas projects in Russia.
The next day, the company announced its withdrawal from the Sakhalin-1 project.
It was noted that the company would not invest in new projects in Russia.

In early August, President Vladimir Putin signed a decree banning shareholders from unfriendly countries from making purchases and sales of shares in Russian strategic enterprises and joint-stock companies, as well as their subsidiaries, until December 31, 2022.
The decree covers stakes in production sharing agreements Sakhalin-1 and the Kharyaga PSA, as well as stakes in equipment manufacturers for the fuel and energy complex that provide maintenance and repair services for such equipment.

Shortly before this, ExxonMobil, which owns a 30% stake in Sakhalin-1, published a report for the US Securities and Exchange Commission, which refers to the activity of transferring the company's rights under the Sakhalin-1 PSA project to a third party.
Who exactly represents the third party was not specified in the report.
According to the Times of India, ONGC Videsh Ltd is ready to expand its participation in the Sakhalin-1 project after ExxonMobil withdraws from it.

In April Exxon Neftegas Ltddeclared force majeure and began to reduce oil production on the PSA project due to events that prevent or delay the company from fulfilling its obligations under the agreements and conducting operations at the required level of international standards for the marine and oil industry.
In its Q2 report, Exxon reported a 30,000 boe/d decline in production at Russian assets over the reporting period (2021 production was 56,000 boe/d) .

In early August, Rosneft, which owns 20% in the project, reported that oil production at Sakhalin-1 has not yet been restored, the tanks of the De-Kastri terminal are 95% full, and oil is not being shipped.
In addition to ExxonMobil and Rosneft, the Sakhalin-1 project involves SODECO (Japan) - 30% and ONGC (India) - 20%.
The total reserves of the project fields are estimated at 307 million tons of oil and 485 billion m 3 of natural gas, the annual production volume at the project is 11.3 million tons of oil.

30 years on: How the collapse of the Soviet Union transformed Russia into a global oil and gas powerhouse

It has been 30 years since the collapse of the Soviet Union transformed global energy markets and set Russia on a pathway to gaining a seat at the OPEC table along with tremendous pricing power over oil and natural gas.

The world's largest exporter of crude and gas to Europe has grown its influence from the shattered remnants of the communist bloc when the future of its energy sector looked in doubt. A year after the period leading to Russia's democratization known as "Perestroika" the country's share of the global oil markets was a fraction of the 12% it currently holds.

"Turbulence in the immediate aftermath of the Soviet Union's dissolution caused the region's crude and condensate supply to fall by 4.2 million b/d between 1990 and 1994 alone," said Paul Sheldon, chief geopolitical adviser at S&P Global Platts Analytics. Today, Russia produces around 9.64 mil b/d, according to the Platts OPEC Survey for July, and Platts assessed Russia's key crude grade Urals CIF Med at $68.145/b on Aug. 25.

At the beginning of January 1984, Platts assessed Russia's key crude grade Urals CIF Med at $28.55/b. On Jan. 31, 1986, prices fell to $19.95/b and remained below $22/b until August 1990, when global prices rose sharply following Iraq's invasion of Kuwait.

"The oil glut of the 1980s, which followed the 1979 oil price shock, was a direct contributor to the collapse of the Soviet Union in 1991. The USSR had just before that become a major global oil producer; lower prices immediately resulted in a substantial loss of hard-currency export revenue, forcing the USSR to deplete its official reserves amid growing deficits of almost everything across the union," said George Voloshin, head of the Paris branch of Aperio Intelligence.

Private investment

This new economic and political reality also created fresh opportunities. Privatization of oil and gas assets allowed foreign investors to enter post-Soviet markets and introduce cutting edge technology to production sites. They also helped to expand the geographical scope of Russian production through new projects developed in eastern Russia, including offshore Sakhalin, as well as in the far north of the country.

"Subsequent periods of Russian oil company privatization ultimately triggered more focused investment, increased efficiencies and technological advances, all of which paved the way for nearly unabated production growth since 1998," Sheldon from Platts Analytics added.

Other former Soviet states have followed similar policies.

"Outside of Russia, landmark foreign investment deals in Kazakhstan and Azerbaijan continue to bear fruit, helping to lift total FSU production by over 7 million b/d between 1998 and 2019, before OPEC+ cuts caused a rare drop in 2020," Sheldon said.

Export options

Foreign investment has also enabled oil and gas producers to develop new infrastructure projects, transforming the customer base for the region's oil and gas.

"The emergence of new export infrastructure, in addition to the Druzhba oil pipeline which was built in the 1960s, has contributed to the expansion of oil producing areas within Russia," Aperio's Voloshin said.

Key new projects include the Eastern Siberia-Pacific Ocean oil pipeline commissioned in 2009 to export to China and the broader Asia-Pacific region. The Baltic Transport system increased export capacity from projects in the Volga Urals and West Siberia as well as northern Russia. In recent years, the government has prioritized development of oil and LNG shipping via the Northern Sea route, which supplies Europe and Asia through Arctic waters.

"I look at how Putin was able to become friends with China and to send more oil to the east and especially start sending more gas to the east and in the Arctic, you look at what's happening on Yamal, you look at what's happening on the second Arctic project, there's going to be a lot of gas flowing to the east and that's going to be in direct competition with Qatar and Australia," independent economist and energy adviser Cornelia Meyer said.

However, more exports and the battle for market share have led to some problems, particularly over Europe's reliance on imports of gas from Russia as well as the influence the Kremlin has on countries that transit Russian gas to Europe. New export infrastructure has also been a key target for US sanctions introduced in 2014 over Russia's role in the conflict in Ukraine.

Economic resilience

Russia's dependence on oil and gas revenues has also evolved over the past 30 years. In 1998, a drop in oil demand sparked by the Asian financial crisis led Russia to default and the ruble to significantly devalue.

From 2000, when Vladimir Putin became Russia's president, a steady rise in oil prices allowed the Kremlin to pay off large amounts of foreign debt and establish a stabilization fund as protection against price volatility. This mitigated the impact of the global financial crisis in 2008 and has helped the country cope with subsequent price volatility, including the impact of growing US shale output since the mid-2010s.

In recent years, Russia's improved budget resilience has allowed it to bargain for increased output volumes within the OPEC+ agreement, as many other members of the coalition's state budgets are more sensitive to oil price volatility.

As the region marks 30 years since the collapse of the Soviet Union, these trends continue to drive political and commercial priorities. The energy transition will add an extra dimension, as producers attempt to balance plans for new hydrocarbons production and export projects with growing concerns about the environment and the increasingly evident impact of climate change.

Gazprom is preparing a project for a new gas supply route to China

Moscow. Gazprom is starting to develop design and estimate documentation for the gas supply route to China. This was stated by the head of the company Alexey Miller.

“Speaking about the current status of the implementation of eastern projects, of course, it should be noted that we continue to work on the Power of Siberia gas pipeline. Until the end of the year, we will be celebrating a very important, significant event. This is the beginning of the flow of gas from the Kovykta field into the gas pipeline. The linear part of "Kovykta - Chayanda" is coming to an end. And, without a doubt, all contractual obligations for 2023, which we have to our Russian consumers and to our Chinese partners, to increase the volume of gas supplies to China, we will absolutely fulfill,” he added.

According to Alexey Miller, the eastern program is, of course, to a large extent aimed at expanding export opportunities and gas supplies to the Chinese market.

“We know that the Chinese market is the most dynamic market in the world, and over the next 20 years, according to forecasts, the growth in gas consumption in China will be 40% of the growth in world gas consumption in the world. Therefore, we signed another contract for gas supplies to China. This is the "Far East" route. For this project, we are already starting to develop design and estimate documentation, ”the head of Gazprom is quoted as saying in Telegram.

He also mentioned the Soyuz Vostok project, a main gas pipeline through Mongolia, which will be a continuation of the Power of Siberia - 2 main gas pipeline.

Russia's state-run gas major Gazprom reported profit more than doubled in the first half of the year as prices jumped amid Europe's energy crisis

Russia's state-run gas major Gazprom reported record net profit for the first half of the year on Tuesday, as elevated market prices continue to aid the Kremlin.

The company earned $41.75 billion, or 2.5 trillion rubles, from the start of 2022. That's up from about 968 billion rubles in the first half of 2021.

Gazprom is also considering paying investors a dividend after not doing so last year. Its board recommended paying 51.03 rubles per share, bringing the total payout to 1.208 trillion roubles.

Gazprom's record profits this year come as the West imposed sanctions on Russia for its invasion of Ukraine. While they largely steered clear of directly banning gas sales, Europe has scrambled to look for alternatives to Russian supplies.

Meanwhile, Dutch TTF, the natural gas benchmark in Europe, is up more than 1,000% compared to a year ago as Gazprom has slashed deliveries and raised concerns about winter shortages.

Gazprom has been accused of weaponizing energy through multiple interruptions to gas flows via the Nord Stream 1 pipeline, which went offline once again on Wednesday. The company has cited maintenance needs for each shutoff event, and the pipeline's flows had been reduced to 20% of capacity prior to the latest shutoff.

The company will also completely shutter natural gas flows to French utility major Engie on Thursday over a payment disagreement.

India Is New Major Player in Russian Oil Market Once Dominated by China

India has pushed into a corner of the Russian oil market once dominated by China, taking a record number of shipments of a Far Eastern grade as the fallout from Moscow’s invasion of Ukraine reshapes trade flows.

Six vessels hauling Russian crude known as ESPO were headed to refiners in the South Asian nation in August, according to traders and shipbrokers. That’s the highest number of cargoes purchased by India since the stream was introduced, and accounts almost one-fifth of available monthly shipments.

“ESPO crude is now becoming a steady flow for India, a country that wasn’t a big fan of the variety for years,” said Emma Li, analyst at Vortexa Ltd. “The voyage to India will take longer, but the shipments might continue as long as the price stays attractive and there aren’t real sanctions blocking the trade.”

India has emerged as a key buyer of Russian energy in the wake of the invasion, scooping up millions of barrels of discounted crude shunned by Europe and the US. As the conflict has dragged on, the third-largest oil importer first ramped up purchases of the flagship Urals crude, which loads from the western part of Russia, and is now competing for ESPO, a distillate-rich grade that comes from the east and was typically favored by Chinese buyers.

The ESPO shipments going to India are cheaper than the nation’s usual Middle Eastern grades, and will likely displace some flows from Saudi Arabia and Abu Dhabi, the traders and shipbrokers said. A recent dip in purchases by China’s Sinopec freed up some volumes, enabling Indian buyers to swoop in, they said.

The August shipments of ESPO are up from July’s pace, when five cargoes went to ports such as Vadinar, Sikka, Paradip and Mundra. Refiners such as state-owned Indian Oil Corp., as well as private processors Reliance Industries Ltd and Nayara Energy Ltd operate plants near those terminals.

Before this year’s spree, India wasn’t a prominent player in the trade, with local refiners citing factors such as ESPO’s small cargo size of 100,000 tons being undesirable for the long and costly journey from Kozmino, where it’s loaded. That had left North Asian nations such as China, South Korea and Japan competing for the 30 to 35 shipments dispatched every month.

Moscow Approves Japan Stakes In Sakhalin Energy Project

Two Japanese trading houses will maintain stakes in a Russian energy project despite Tokyo joining sanctions on Moscow over the war in Ukraine, as the Asian country looks to secure its power supply.

Moscow is transferring operation of the Sakhalin-2 oil and gas project to a new Russian firm, with foreign stakeholders required to apply for approval to maintain their interests.

Like other countries that have joined sanctions, Japan is seeking to reduce its reliance on Russian energy imports but struggling to find alternatives.

The resource-poor country faced a power crunch during a summer heatwave this year, and is looking ahead to a potentially difficult winter.

Mitsubishi Corp said Thursday that its 10 percent stake in the Sakhalin-2 project had been approved by Moscow, a day after Mitsui said its 12.5 percent interest had also been given the green light.

The Japanese government had backed both firms continuing in the project.

Russia supplies around nine percent of Japan’s liquified natural gas (LNG) demands, almost all of which comes from Sakhalin-2.

“This decision is extremely significant for our nation’s stable energy supply,” government spokesman Hirokazu Matsuno said at a regular briefing on Thursday.

“We will continue to monitor the situation to ensure stable LNG supplies, together with the public and private sectors.”

Japan is heavily dependent on imported fossil fuels, in part because many of its nuclear reactors have been offline since the 2011 Fukushima disaster.

The country had previously ruled out withdrawal from the Sakhalin-2 project, despite joining Western-led energy sanctions on Russia.

Last week, Prime Minister Fumio Kishida called for a push to revive the country’s nuclear power industry in a bid to tackle soaring imported energy costs linked to the war.

Before the Fukushima meltdown, around a third of Japan’s power generation came from nuclear sources, but in 2020 the figure was less than five percent.

“LNG accounts for over one-third of electricity generation in Japan, while the recent closure of ageing thermal power plants has further constrained policymakers’ options,” wrote James Brady, vice president of Teneo consultancy, in a note.

“The Sakhalin decisions reflect the pragmatic realities of keeping the country’s heat and lights on during the most challenging international energy market environment for decades.”