Russia to be Fourth Largest LNG Exporter: Mikhelson

In just five years Russia could become the world's fourth-largest LNG producer, according to a statement by Leonid Mikhelson, the CEO of Novatek, the privately-owned company backing the Yamal LNG project. He predicted that the resource base of the Gydan Peninsula will allow the country to export up to 70mn metric tons/yr.

"I think that in four to five years we will increase the resource base. We have increased the volume of geological exploration work here many times over," Mikhelson told a visiting session of the State Duma Council in Sabetta, the northern Russian port where the Yamal LNG tankers sail from. "And I think that the known resource base alone of Novatek is enough to make it possible to talk about the production of 70mn mt/yr."

Meanwhile, according to calculations by the International Energy Agency, in five years the aggregate capacity for LNG production in the world will increase to 650mn mt/yr. Australia will produce 117.8mn mt, the US 106.7mn mt; and Qatar 104.9mn mt. In Russia, by that time, there could be at least four large gas liquefaction plants: Novatek’s Yamal LNG and Arctic LNG-2; Gazprom's Sakhalin-2 LNG; and Baltic LNG, also a Gazprom project. Their combined capacity will exceed 80mn mt/yr.

And if Rosneft realises the Far East LNG project, then Russia will be able to produce up to 90mn mt/yr of LNG in five years. This will lead it to a solid fourth place in terms of liquefaction in the world.

It is worth noting that the Yamal LNG project has enabled the company to actively expand its presence on the world LNG market, since only one LNG production facility, the much smaller Sakhalin-2 project, existed before.

Arctic LNG-2 will be more powerful and also cheaper than Yamal LNG as Novatek learned lessons from Yamal LNG. For example, using a gravity-based system instead of piles to support the modules will cut the costs by about a third, compared with the $27bn Yamal LNG plant. Novatek also says the production costs of the LNG itself are low, owing to cheap gas.