Shell Still Hopeful for Sakhalin Boost

Anglo-Dutch major Shell is still hopeful that it will secure enough gas to justify a third train at the Sakhalin Energy LNG plant in Russia's far east, country head Cederic Cremers told the IP Week conference in London February 27.

The Gazprom-operated plant shipped its 1,500th cargo in the summer, bringing total exports to 100mn metric tons. The plant has been beating expectations by producing just over 11mn mt/yr. That's above nameplate capacity of 9.6mn mt/yr from two nominal 4.8mn mt/yr trains. Operating costs and environmental performance at Sakhalin are both industry-leading, Cremers said.

Theoretical work on a third train has progressed well, but Cremers said the partners need certainty that there will be enough gas supply for all three trains for their full 25 year life. "That has not been achieved but we hope to do so this year," he said.

Shell initiated the project with Mitsui and Mitsubishi. Gazprom joined later and took 50% plus a share, diluting the other three partners. Shell now has 27.5% minus one share; Mitsui 12.5% and Mitsubishi 10%.

Shell and Gazprom are also, with Japanese Mitsui and possibly Itochu, working on a Baltic LNG project, which would, Cremers said, be the "smartest" of Russia's LNG export projects. The Gazprom website gives it capacity of 10mn mt/yr. Cremers said the plan was to have two trains each of 6.5mn mt/yr. It would be a shorter shipping distance to European, west African, Middle Eastern and south Asian LNG markets as far east as Singapore than from US Gulf Coast projects, he said. Bunkering and trucking operations would be a sideline as well.

Shell and Gazprom have set up a technology joint venture, to which Shell has contributed its double-mixed refrigerant process. The plant will combine Russian know-how and specifications with Shell's proprietory technology and international trading expertise. Baltic LNG will develop a local pool of vendors and suppliers to drive down costs – an idea that Russian independent Novatek has already adapted, building its own technology centre in Murmansk, in Russia's north.