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Novatek's Arctic LNG-2 project advances with Siemens equipment supply deal

Highlights

FID for 19.8 million mt/year plant set for mid-2019

Siemens deal covers three feed gas compressors

London — Russia's Novatek said Friday it has signed a deal with Germany's Siemens for the provision of compressor equipment for the planned 19.8 million mt/year Arctic LNG-2 project in northern Russia.

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The deal moves the Arctic LNG-2 project -- Novatek's second LNG export facility after Yamal LNG -- closer to the final investment decision planned for the middle of this year.

The scope of supply under the contract includes three feed gas compressors and six boil-off gas compressors as well as providing for localizing the equipment fabrication for the project's third train in Russia.

"Siemens and Novatek have a successful working relationship as they supplied gas turbine generators and boil-off gas compressors for our Yamal LNG plant," Novatek deputy chairman Alexander Fridman said.

"The supply contract envisages new prospects for localizing the compressor equipment fabrication for the LNG industry, which is consistent with our strategic aim of creating and developing an LNG center of excellence in Russia."

Arctic LNG-2 envisages constructing three LNG trains of 6.6 million mt/year using gravity-based structure platforms.

Novatek CFO Mark Gyetvay, speaking this week at the European Gas Conference in Vienna, said Arctic LNG-2 had just finished its FEED work, with 25% of equipment contracted.

He said the project would have a capital cost some $9 billion lower than the $27 billion Yamal LNG plant, which started up in December 2017 and which launched its third train in December last year.

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On the financing of Arctic LNG-2, Gyetvay said the company would finance more from its balance sheet, something only the larger LNG players were able to do in the current market environment.

He added that Yamal LNG had seen "double" the returns compared with the global average because the project is "cost-competitive."

-- Stuart Elliott, stuart.elliott@spglobal.com

-- Edited by Jonathan Fox, newsdesk@spglobal.com