Saipem JV Scoops $2.5bn Arctic 2 Contract
Italian Saipem, in a joint venture with Turkey’s Renaissance (Ronesans), has been awarded an onshore engineering and construction project at the Novatek-led Arctic LNG 2 project, which has an overall value of €2.2bn ($2.5bn).
"As leader of the joint venture, with a shareholding of 50%, Saipem’s portion of the total amount is therefore approximately €1.1bn [$1.25bn]," the company said December 19. The project encompasses the construction of three LNG plants, each of 6.6mn mt/yr, that will be installed on concrete Gravity Based Structures (GBS).
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The deal is subjected to operator, Russian independent Novatek, taking the final investment decision on Arctic LNG 2; also the project’s shareholder structure is yet to be determined, with various Japanese and Indian firms, and even Saudi Aramco, being mooted as possible partners.
Novatek, with a 60% stake in Arctic LNG 2, transferred the remaining 40% project stake to a wholly owned subsidiary Ekropromstroy September 2018, but the stakes can be sold to other companies. Total has also expressed an interest in at least 10% of any future Novatek-led LNG export projects; the French firm already has a 19% stake in Novatek itself.
Arctic LNG 2, expected to become operational in 2022-2023 is located in the western part of the Gydan Peninsula, close to Novatek’s existing Yamal LNG facilities, which reached its full capacity of 16.5mn mt/yr on November 22. The new LNG project will be a lot cheaper to build, as the design will be a gravity-based system and not require piling. Each train will be larger too, at 6.6mn mt/yr compared with Yamal LNG's 5.5mn mt/yr. Combined, the Yamal and Arctic plants will be able to produce about 38mn mt/year.
Saipem said that its awarded project encompasses the construction of three LNG plants, each with 6.6mn mt/yr capacity that will be installed on concrete GBS and include LNG storage facilities totalling 687,000 m3. The GBSs will be fabricated at two dry docks in a facility provided by Novatek in Murmansk.
Novatek said Dec.19 that Italian state-run export credit agency SACE signed a memorandum of strategic cooperation relating to the Russian firm's current and future LNG projects. As part of that, both parties agreed to develop long-term cooperation on the Arctic LNG 2 project and potential new LNG projects, involving Italian suppliers and engineering companies," noted Novatek CEO Leonid Mikhelson. He added that SACE had helped with financing of its Yamal LNG project and that now other export credit agencies too have expressed interest in participating in financing of Novatek's Arctic LNG projects.
SACE chief executive Alessandro Decio said: “We are very keen to strengthen our partnership with Novatek, one of the key players in natural gas sector worldwide. The agreement will disclose huge opportunities for Italian companies operating in oil & gas, a key sector for our exports where Italian technology and know- how is well recognised globally. I hope this will be a step towards a win-win and long-term relationship with Novatek, especially looking forward to the Arctic LNG 2 project. It will also strengthen our commitment to the Russian market, traditionally strategic both for us and Italian companies.” SACE in 2016 guaranteed a €400mn loan to finance the construction of the Yamal LNG.
Novatek said its planned Arctic LNG 2 project is based on the hydrocarbon resources of the Utrenneye field which at December 1 2018, had reserves under the Russian classification system of 1,978bn m3 gas and 105mn metric tons of liquids.