Arctic LNG 2 development reaches FID

Total SA, Novatek, and the other project shareholders have approved final investment decision for the Arctic LNG 2 development on Russia’s Gydan peninsula.

Total SA, Novatek, and the other project shareholders have approved final investment decision for the Arctic LNG 2 development on Russia’s Gydan peninsula. The project will produce 19.8 million tonnes/year of LNG and is expected to export its first cargo by 2023. The second and third trains will start up by 2024 and 2026, respectively.

Arctic LNG 2 production will be delivered to international markets by a fleet of ice-class LNG carriers via the Northern Sea Route and the transshipment terminal in Kamchatka for cargoes bound for Asia and the transshipment terminal close to Murmansk for cargoes headed to Europe.

Total has a direct 10% interest in Arctic LNG 2 alongside Novatek 60%, China National Offshore Oil Corp. 10%, China National Petroleum Corp. 10%, and a Mitsui-Jogmec consortium Japan Arctic LNG 10%. Total also owns 11.6% indirect participation in the project through its 19.4% stake in Novatek, for a 21.6% aggregated economic interest in the project.

Natural gas will be sourced from the Utrenneye onshore gas and condensate field. As of yearend 2018, Utrenneye’s 2P reserves under the Society of Petroleum Engineers Petroleum Resources Management System totaled 1.138 trillion cu m (tcm) of natural gas and 57 million tons of liquids. Under the Russian classification, reserves totaled 1.978 tcm of gas and 105 million tons of liquids.

Installation of three concrete gravity-based structures (GBS) in the Gulf of Ob, each supporting a 6.6 million-tpy liquefaction train, will reduce capital expenditures by more than 30%/ton of LNG compared with the nearby and already operating Yamal LNG, also led by Novatek. Proximity to Yamal will also allow Arctic LNG 2 to leverage synergies with existing infrastructure and logistics.

A consortium of TechnipFMC PLC, Saipem SPA, and Scientific, Research & Design Institute for Gas Processing OJSC won the project’s engineering, procurement, and construction contract. Russian company Saren, a joint venture of RHI Russia and Saipem, will design and build the GBS at Novatek-Murmansk’s LNG Construction Center. More than 90% of long-lead items (including cryogenic heat exchangers, gas turbines, and compressors for the liquefaction trains) have been ordered. Drilling of production wells and construction of roads and the field’s production infrastructure has begun.

The project will cost an estimated $21.3 billion.

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