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Novatek Still Plans LNG Expansion Despite Sanctions


Editor : Andrew Kelly


Russia's Novatek will keep developing projects to meet growing global demand for LNG, despite the difficulties it faces as a result of sanctions, CEO Leonid Mikhelson said Thursday.

US sanctions in response to Russia's war against Ukraine have made life complicated for Novatek, and because of this it no longer sets firm growth targets.

But the Russian LNG exporter is not throwing in the towel and will keep building LNG plants to meet growing global demand, Mikhelson told the Verona Eurasian Economic Forum in the United Arab Emirates.

Global LNG demand is forecast to reach 920 million tons per year by 2040, up from the current level of around 400 million tons/yr, he was quoted as saying.And without Russia, the world will be unable to proceed with the energy transition and will face a supply crisis, he said.US sanctions have already stymied the Novatek-controlled Arctic LNG 2 project, which started operations at the end of last year but subsequently suspended them because it was unable to sell blacklisted LNG cargoes.Other new projects planned by Novatek have also been blacklisted by the US, as has state-run Gazprom's Ust-Luga LNG plant, now under construction, and privately owned A-Property's Yakutia LNG scheme, which is currently in the design stage.The US has made clear that it will blacklist all new LNG projects in Russia as long as the war in Ukraine continues.


Surge in Global Supply


Industry experts say that sanctions against Russia and a surge of new LNG capacity in other countries over the next several years are likely to limit the country's share of the global LNG market, which was estimated at around 8% as of 2023.Nikita Illeritsky, an analyst at Moscow-based consultancy Kept (previously part of KPMG) told an industry webinar on Thursday that Russia could still achieve its goal of capturing 20%-25% of the global LNG market some time after 2035. However, in order to do so, Russia would have to overcome its current technology deficit in the areas of large-scale LNG production and tanker construction, he said in his presentation.

Growing global competition among suppliers from 2027-28 and rising development costs will work against Russian LNG projects, but this will be offset by the potential for strong demand from developing countries, Illeritsky said. Addressing the same webinar, Alexander Klimentyev, vice president of Russia's national LNG association, said the biggest problem for Russian suppliers will be finding willing buyers, given the current geopolitical reality. Europe cannot be regarded as a long-term market for Russian LNG, as politics will trump the advantage of lower-cost imports from Russia, he said. Furthermore, the example of Arctic LNG 2 shows that even "friendly" countries such as China and India can be reluctant to buy even discounted volumes from blacklisted Russian projects for fear of being hit by secondary sanctions, Klimentyev added.

Source : Energy Intelligence

 

 

 

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