Russia Expedites Domestic LNG Industry
Russia’s two largest gas producers, Gazprom and Novatek, are looking to develop a home-grown LNG industry, with the help of foreign investors.
The CEOs of Gazprom, Linde, Power Machines and Salavatneftemash signed June 17 a memorandum of understanding to co-operate on gas liquefaction and processing equipment.
Also attending the St Petersburg International Economic Forum, Gazprom’s rival LNG developer Novatek signed an agreement with Italian firms to enable it to reap the benefits of foreign technology in the same field.
(image credit: Twitter/@SPIEF)
The MoU signed by Gazprom’s Alexei Miller, Linde’s Wolfgang Buechele, Power Machines’ Alexei Mordashov and Salavatneftemash’s Alexei Mityushov, of Salavatneftemash, paves the way for the companies to “explore the possibilities for joining efforts with the purpose of establishing a Russian-based manufacturer of natural gas liquefaction and processing equipment.”
If they find they can produce goods that meet the technical specifications at a competitive price – using Russian equipment as far as possible – they could form a partnership or a joint venture by the end of the year.
Novatek meanwhile signed similar documents with Italy’s Saipem and Nuovo Pignone. Cooperation with Saipem entails implementing Novatek’s prospective LNG projects, again producing as much of the equipment as possible in Russia. CEO Leonid Mikhelson said the agreements with Saipem envision developing cooperation on Novatek’s “high-quality resource base and we are considering opportunities to implement investment projects and improve technological and intellectual capacities together with our partners.”
With Nuovo Pignone, the strategic cooperation agreement covers the development of the Russian oil and gas industry, including localizing state-of-the-art technological solutions in manufacturing and maintaining of energy equipment for Novatek’s LNG projects.
The companies also signed a 25-year service agreement for the Yamal LNG Plant. Nuovo Pignone will be ensuring safe operation of the equipment in harsh weather conditions using “advanced engineering technologies and digital solutions for data monitoring and processing. In addition, the agreement envisages training of Russian specialists to be involved in the equipment maintenance.”
The agreements extend the track record of long-term partnership between the companies. In 2013, Nuovo Pignone concluded a contract to supply turbomachinery equipment produced and tested in Italy for the three trains of Yamal LNG project.
Mikhelson said that to develop the huge resource potential of the far north economically, it was “critically important to work with world-class companies” to bring the technologies and manufacturing of high-tech equipment localized in Russia. The partnership with Nuovo Pignone is a significant element in implementation of this strategy.”
Air Products won the tender for Yamal LNG, which includes the French major Total as minority shareholder. It said it was “the largest project ever of its kind to be located in the Arctic, and the most northern LNG facility in the world. There are some specific challenges with it, beyond the very remote location, such as huge temperature swings. Our equipment and process were specifically configured to address these challenges.”
Sanctions that the US and the EU have imposed on Russia, in response to Russian armed forces’ activities in Ukraine, have not prevented Novatek from building Yamal LNG, but the weak rouble is hitting project economics, and forced Gazprom to source equipment from the domestic market – a strategy for which it is claiming major cost savings and patents.
William Powell | www.naturalgaseurope.com