TotalEnergies buys 10% of Arctic LNG trans-shipment operator

TotalEnergies, the newly named French energy major, said June 3 it had signed a deal with Novatek to acquire 10% of Arctic Transshipment, which owns and will operate 2 LNG trans-shipment terminals in Northern Russia.

It comes as Novatek, with the French company as a partner, prepares to start up its second major LNG export project, Arctic LNG 2, in 2023, for which long-term supply deals were signed earlier in the week with China's Zhejiang Energy Gas Group and trading company Glencore. Russia's LNG renaissance is being spearheaded by Novatek, with TotalEnergies and Chinese and Japanese companies as partners, as the country diversifies its hydrocarbon mix.

Novatek plans to use its chartered icebreaker fleet to export LNG to trans-shipment centers for loading onto conventional LNG tankers, limiting the use of ice-class tankers and so cutting costs and CO2 emissions.

"These terminals mark an important step in the advancement and consolidation of the Arctic LNG 2 project, and will contribute to the safe and sustainable export of cargoes from our existing and developing Yamal projects," TotalEnergies CEO Patrick Pouyanne said, according to a company statement released after the signing at the St. Petersburg International Economic Forum.

The terminals are located at Murmansk for westward shipping, and Kamchatka in the Far East for supplies to Asia.

Each complex features a floating storage unit with a capacity of 360,000 cubic meters and two ship-to-ship trans-shipment points.

Novatek said previously operations would begin at the terminals by early 2023 and each will have a 10 million mt/year capacity at launch.

Decarbonization deal

TotalEnergies cooperates extensively with Novatek, holding a 20% stake in Yamal LNG, launched in 2017, and a 10% stake in Arctic LNG 2. It also holds a 19.4% stake in Novatek itself.

The two companies also signed a memorandum of understanding on decarbonization, hydrogen and renewables, amid an upsurge in interest in energy transition themes among Russian companies.

The agreement covers potential cooperation on carbon capture and storage as well as utilizing renewable energy sources to reduce the carbon footprint of joint LNG projects, Novatek said.

The MoU includes possible production and use of hydrogen as a low-carbon fuel, improving power efficiency of LNG production, as well as marketing of carbon-neutral products including LNG.

Novatek CEO Leonid Mikhelson said "Our long-term goal is to provide the global markets with affordable, secure and low-carbon natural gas, and the cooperation with TotalEnergies and our partners is one way for us to contribute to the decarbonization of the global energy industry."

Asia focus

The deals signed with Zhejiang Energy Gas Group and Glencore on June 2 both envisage long-term shipments to Asia, a priority for Novatek, which said LNG demand there had recovered from the pandemic.

"The fast-growing Chinese market is a key region in our LNG marketing strategy and we plan to further increase our supplies of cleaner-burning LNG to assist China in reaching its net zero targets by 2060," Mikhelson said.

Arctic LNG 2 will comprise three trains, each with a capacity of 6.6 million mt/yr, with the first provisionally due to launch in 2023, the second in 2024 and the third in 2025.

S&P Global Platts assessed the price of renewable hydrogen (Netherlands, PEM electrolysis including capex) at Eur5.29/kg ($6.42/kg) on June 2. The comparable price for natural gas-based hydrogen with CCS was Eur2.19/kg.