Yamal LNG T4 Sees Further Delay
The launch of Yamal LNG's fourth train appears to have been pushed back again, with the start-up now expected in the third quarter of this year, Novatek CFO Mark Gyetvay said in an earnings call on February 20.
The 0.9mn mt/yr train, which will join three 5.5mn mt/yr trains already in operation on Russia's Yamal Peninsula, was originally scheduled to start production before the end of 2019. As NGW reported, Novatek CEO Leonid Mikhelson told reporters in January that it would be ready to operate in the first half of this year. Novatek has not commented on the delay, but some of the Russian press has claimed that its processing pipelines were designed incorrectly.
Yamal LNG's fourth train will be the first to use Novatek's proprietary liquefaction technology, Arctic Cascade. The company plans to deploy the technology next at its 5mn mt/yr Obskiy LNG plant, which it aims to take a final investment decision on later this year.
According to Gyetvay, the fourth train is now 73% complete, compared with 61% at the end of September.
"When designing liquefaction trains using a modified version of our Arctic Cascade technology for Obskiy LNG, we decided to improve and enhance the technical solutions on Train 4," he explained. "We will complete the construction and begin commissioning of Train 4 in the 3Q 2020."
"The implementation of the Obskiy LNG project and its final investment decision (FID) is not dependent on the timing and launch of Train 4 at Yamal LNG," he continued.
Novatek has a 50.1% stake in Yamal LNG, while France's Total has 20%, China's CNPC a further 20%, and Beijing's Silk Road Fund 9.9%. Obskiy LNG, on the other hand, is expected to be solely owned by Novatek.
Novatek's profit surged more than fivefold in 2019, on the back of the sale of shares in its Arctic LNG-2 project. But its revenues were also up slightly, as higher output at Yamal LNG more than offset lower international gas prices.
Gyetvay described 2019 as a "fantastic year," with Yamal LNG having produced 18.4mn mt/yr of LNG - 10% more than its nameplate capacity. He also pointed to an FID being taken on the 19.8mn mt/yr Arctic LNG-2 project in September.
"Despite all of our success over the past year, we now confront a market oversupplied with natural gas. This supply/demand imbalance is exasperated by the commissioning of new LNG complexes, a demand situation that has weakened with warmer than normal winter weather, high storage balances in Europe and now, growing global concerns over the coronavirus in China," the CFO said.
He described the coronavirus outbreak as a black swan event with an impact that is difficult to gauge.
"The present market imbalance does not represent a structural shift in our future gas demand forecast. We remain very optimistic that the strategy we have adopted to become a leader in delivering low-cost LNG to key consuming global markets is the right strategic decision," he said.
Broadly, Novatek's strategy calls for a rapid expansion in its LNG capacity to 70mn mt/yr by 2030, up from 19mn mt last year. It is using its own LNG tankers to ship its gas to markets, and is interest in building LNG regasification terminals and developing gas retail operations in key Asian markets, in order to cut costs and consolidate its market share. Yamal LNG offers some of the lowest landed LNG costs globally, Gyetvay claimed. Arctic LNG will be cheaper thanks to the use of gravity-based system for housing the liquefaction.
Gas will play a key role in the energy transition, Gyetvay said, noting that the replacement of all coal with gas by 2050 would enable the world to meet the goals of the Paris climate accord.