Gazprom, Shell Launch Baltic LNG Feasibility Study

Gazprom LNG St Petersburg and Shell Gas & Power Developments BV signed an agreement on the feasibility study on Baltic LNG on August 8, the Russian company said. They are the two subsidiaries of Gazprom and Shell that are to implement the Baltic LNG project.

A feasibility study however does not guarantee any near-term development of the project.

Baltic LNG involves the construction of a liquefaction plant of 10mn metric tons/yr export capacity in the port of Ust-Luga in the Leningrad Region. “The study will assess and select the main technical solutions for Baltic LNG, and the development of a conceptual schedule for the implementation of the project,” said Gazprom. Part of the research will be the study of the principles of harmonisation of Russian and international standards in the LNG sector and an analysis of possible measures to maximise the participation of Russian suppliers in the Baltic LNG project. This is believed to be in response to international sanctions against Russia since its annexation of parts of Ukraine in 2014, sanctions which the US is now stepping up.

Gazprom CEO Alexey Miller and his Shell counterpart Ben van Beurden signed the main terms of the joint venture agreement for the Baltic LNG project on June 3 2017 at the St. Petersburg International Economic Forum. That document outlined the principles for the functioning of a Gazprom-Shell joint venture that would will carry out design, financing, construction and operation of the LNG plant.

But a commitment to a feasibility study is merely a staging post towards any development. Shell has several potential LNG developments worldwide competing for its investment capital, with Russian ones now likely to be competing with Qatar for Shell's capital. 

Gazprom and Shell are the largest partners in Russia's only LNG export plant, Sakhalin-2, which produced more than 10.9mn mt LNG last year, exceeding nameplate capacity by more than 1.3mn mt. However plans for a third liquefaction train at Sakhalin have been deferred in recent years, in view of a glut of LNG supply, although Shell indicated in early June that the front-end engineering (Feed) stage of project preparation was “nearly completed.”  Gazprom meanwhile, also in June, also outlined plans for a small-scale liquefaction plant in the Black Sea with OMV.

Also August 8, Gazprom and Uniper hosted an event in St Petersburg to celebrate 25 years of their scientific and technical cooperation.

Azerbaijan Desk