Russia Launches Yamal Giant Gas Project in Arctic

Russia Launches Yamal Giant Gas Project in Arctic

The $27 billion Yamal LNG site will start with production capacity of 5.5 million tons per year and increase this to 16.5 million tons by the start of 2019.

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Russia has launches its Yamal gas plant in Arctic Siberia, a gigantic project in one of the world’s most remote areas, as the region becomes more accessible due to climate change.

Russia’s privately owned gas producer Novatek has partnered with France’s Total and China’s CNPC at the helm of the project, which has already sent its first shipment of liquefied natural gas (LNG) from the port of Sabetta.

The $27 billion site – one of the most ambitious in the world – is set to start with a production capacity of 5.5 million tons per year and increase this to 16.5 million tons by the start of 2019.

The Yamal LNG Project

Yamal LNG, owned by Novatek (50.1%), Total (20%), China’s CNPC (20%) and the Silk Road Fund (9.9%) has had its share of financial and technical hurdles over the years.

While the Yamal peninsula has considerable hydrocarbon reserves, it is an isolated region in the Arctic circle, about 2 500km from Moscow and covered by ice for most of the year, where temperatures dip as low as -50°C.

Since its inception in late 2013, an airport and a port have had to be constructed for the project, as well as gas reservoirs and the LNG plant itself.

“Despite challenging operating conditions, Yamal LNG was delivered on time and on budget,” said Samuel Lussac, an oil and gas specialist at Wood Mackenzie. “That is unusual in the LNG industry”.

Despite the project’s completion, Yamal LNG still faces risks and the coming months will show “whether the plant can operate smoothly in the harsh Arctic environment”, Lussac said.

Transportation through the Northern Sea Route also remains undeveloped and “its feasibility as a major LNG delivery route is unclear”, he said.

Changing Logistics With Yamal

Russia wants the route to become a shorter, easier passage to coveted Asian markets and has built several massive icebreakers in recent years.

It is also hoped the project will contribute to understanding how to navigate the Northern Route and “give more clarity into the potential development of the Arctic”, said Sberbank-CIB analyst Valery Nesterov.

The route along the northern coast of Siberia allows ships to cut the journey to Asian ports by 15 days compared with the conventional route through the Suez Canal, according to Total.

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