Russian President Vladimir Putin on Friday launched a $27
billion liquefied natural gas (LNG) plant in the snow-covered plains of
the Arctic as Russia hopes to surpass Qatar to become the world's
biggest exporter of the chilled fuel.
The Russian
president congratulated workers as he oversaw the first gas shipment
being loaded onto an ice-breaking tanker from an LNG plant amid minus 28
degrees Celsius weather in the port of Sabetta on the Yamal Peninsula
above the Arctic Circle.
“This is a large-scale project
for Russia,” Putin said. “At the start of the project, people told me
not to pursue this. Those who started this project took a risk but
achieved a result.”
Saudi Arabian Energy Minister Khalid al-Falih and other top officials were present for the occasion.
For the project, Russia's privately owned gas producer Novatek partnered with France's Total and China's CNPC.
Qatar is currently the world's biggest LNG exporter.
Russia, the world's biggest gas exporter, derives a huge share of income from pipeline deliveries to Europe.
With
Yamal LNG, Russia intends to strengthen its market presence in Asia and
demonstrate its capacity to exploit huge Arctic reserves despite major
technological challenges.
'On time and on budget'
Dmitry Monakov, the project's first deputy director, said
that producing LNG in permafrost was easier than in warmer climes, an
apparent dig at countries like Qatar.
“Nature itself helps us to more effectively liquify gas with the help of such low temperatures,” he told AFP, adding that the plant effectively sat on a gas field so transportation costs were low.
Patrick Pouyanne, Total chairman and CEO, praised the project's “remarkably low upstream costs”.
“Together
we managed to build from scratch a world-class LNG project in extreme
conditions to exploit the vast gas resources of the Yamal peninsula,” he
was quoted as saying in a company statement.
The tanker
carrying the first LNG cargo is named after Christophe de Margerie, a
former Total CEO who died in an accident on a runway of a Moscow airport
in 2014.
White whiskers have been painted on it in honour of the late CEO, who was known for his white bushy moustache.
The
site is operated by Yamal LNG company, owned by Novatek (50.1 per
cent), Total (20pc), CNPC (20pc) and Silk Road Fund (9.9pc).
The
$27 billion project is set to start with a production capacity of 5.5
million tonnes per year and increase it to 16.5 million tonnes by the
start of 2019.
“Despite challenging operating
conditions, Yamal LNG was delivered on time and on budget,” said Samuel
Lussac, an oil and gas specialist at Wood Mackenzie consultancy. “That
is unusual in the LNG industry.”
“Novatek, once a domestic gas supplier, becomes a global LNG player” with the project, he added.
Risks remain
The project has had its share of financial and technical hurdles over the years.
While
the Yamal peninsula has huge hydrocarbon reserves, it is an isolated
region above the Arctic Circle, about 2,500 kilometres from Moscow and
covered by ice for most of the year, with temperatures dipping as low as
minus 50 degrees Celsius.
Since its inception in late
2013, an airport and a port have had to be constructed, as well as gas
reservoirs and the LNG plant itself.
Securing financing for the project was tricky.
US
sanctions against Novatek made it virtually impossible to borrow from
Western banks, and Chinese partners eventually stepped in to resolve the
issue.
Despite the project's completion, Yamal LNG still faces risks, analysts said.
Lussac
of Wood Mackenzie said that the coming months will show “whether the
plant can operate smoothly in the harsh Arctic environment”.
Transportation
through the Northern Sea Route also remains undeveloped, and “its
feasibility as a major LNG delivery route is unclear”, he added.
Russia hopes the route will become an easier path to coveted Asian markets.
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.