Tax breaks ease development of LNG projects on Yamal Peninsula

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, July 22 -- Russian natural gas producer Novatek, taking advantage of newly announced tax breaks, plans to construct an LNG facility on the northern Yamal Peninsula in 2016.

“Synergized efforts of federal and regional authorities and investors will create on Yamal a major world center for the production of [LNG],” said Yamal Gov. Dmitry Kobylkin.

Novatek expects to build the Yamal LNG project in three phases: the first is to be completed in late 2016, while construction of the second and third is to take place in 2013-17 and 2014-18.

Word of the new facility follows approval by the Russian government of the acquisition of a 20.5% stake by Total SA in the northern Yamal LNG project from Novatek.

The acquisition follows Total’s purchase of a 12.09% stake in Novatek for around $4 billion in early April. In March, the two sides agreed to that purchase as well as to the acquisition of a further 20% stake in Novatek's Yamal LNG project.

Russia’s Prime Minister Vladimir Putin said Total's entry into the Yamal LNG project "creates the necessary platform to implement jointly a major program to develop Yamal gas fields and produce LNG."

According to Putin, the cost of the Yamal project is expected to reach at least $36 billion, with construction to include the 15 million tonne/year plant, a port, and LNG carriers along with regional networks.

Putin, who claimed that the first tankers at the port are expected to be loaded in 2018, said the Yamal project aims to help Russia diversify its export routes and raise the country's share of the global LNG market.

New tax law
The decision to develop Yamal has been made easier after Russia’s President Dmitry Medvedev signed into law various oil and gas tax breaks including scrapping the extraction tax for gas produced in the Yamal peninsula for conversion to LNG.

The exemption is considered especially crucial for Total, which now owns a substantial stake in Novatek, and for Novatek’s greenfield project to produce and liquefy gas in the Yamal Peninsula.

The tax breaks will apply to gas fields in Yamal until production at a field reaches 250 billion cu m of gas and 20 million tonnes of gas condensate. The tax break applies only to fields that produce gas for liquefaction.

Medvedev also cancelled the extraction tax for all oil fields that are north of the 65th parallel in the Yamal peninsula and Yamal Nenets region until production at a field reaches 25 million tonnes.

According to Andrew Neff, analyst with IHS Global Insight, “The zero-rate gas extraction tax for the Yamal Peninsula is geared to help spur investment in an area that is expected to serve as the foundation for the next generation of gas development in Russia.”

More succinctly, one industry observer told OGJ that, “This makes Yamal production and LNG plant a lot more attractive and economical.”

Contact Eric Watkins at hippalus@yahoo.com.

Related Articles

Woodside to buy Apache’s interests in Wheatstone, Kitimat LNG for $2.75 billion

12/15/2014 Woodside Petroleum Ltd. has agreed to acquire interest in the Wheatstone LNG and Kitimat LNG projects, respectively in Western Australia and Britis...

Watching Government: Russia: On the ropes?

12/15/2014 Russia's Dec. 1 cancellation of its South Stream natural gas pipeline was not surprising. European nations have signaled for years that they intend...

Canada Briefs

12/12/2014

Kinder Morgan to deliver natural gas to Corpus Christi Liquefaction

12/11/2014 Kinder Morgan Inc. (KMI) companies Kinder Morgan Texas Pipeline, Kinder Morgan Tejas Pipeline, and Tennessee Gas Pipeline Co. (TGP) have entered in...

Magnolia LNG lets EPC contract to SK E&C USA

12/03/2014 Magnolia LNG LLC parent-company Liquefied Natural Gas Ltd. agreed to an engineering, procurement, and construction contract with SK E&C USA cov...

Pipeline leak dampens Atlantic LNG production

12/01/2014 Atlantic LNG (ALNG) reported a 35% reduction in LNG production because of insufficient natural gas supply from Trinidad and Tobago’s National Gas C...

Real-time monitoring improves LNG inventory measurement

12/01/2014 Kogas has improved the calculation method for determining stocks at its LNG terminals, changing from a sampling method to a real-time monitoring sy...

Watching Government: Greece and energy in Europe

11/24/2014 Amid growing energy supply geopolitics, Greece is a stable anchor within a rapidly destabilizing region, Yannis Maniatis, its Environment, Energy, ...

Freeport LNG nears construction phase

11/19/2014 Freeport LNG Expansion LP expects later this month to close on financing and begin construction on the first two trains of its natural gas liquefac...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected