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Novatek mulls 20 mil mt/year LNG transshipment terminal in Murmansk

Energía | Energy Transition

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Novatek mulls 20 mil mt/year LNG transshipment terminal in Murmansk

Moscow — Russian natural gas producer Novatek is considering building a 20 million mt/year transshipment terminal in the northern city of Murmansk, CEO Leonid Mikhelson said late Monday, in a move that could help it save on transporting LNG westward from its active and future LNG plants in the Arctic via the Northern Sea Route.

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The Murmansk terminal would mirror the transshipment terminal the company plans to build off the northeastern Kamchatka peninsula, to allow reloading LNG cargoes traveling east along the NSR onto regular tankers for onwards shipment to Asia to optimize transportation costs.

"In Murmansk, we plan to build an analogous transshipment [terminal to the one in Kamchatka] also with the capacity of up to 20 million mt/year," Mikhelson was quoted by Prime news agency as saying in the port of Sabetta, from where the company has been shipping LNG since December when it launched the first train of its first LNG plant, Yamal LNG.

The Kamchatka terminal is expected to be launched in 2022 and has an option of doubling the capacity to 40 million mt/year, Novatek officials said earlier this year.

The Murmansk terminal's exact location will be determined "in the nearest future," Mikhelson said, adding the Ura Bay, some 40 km from Murmansk, is currently under discussion with the defense ministry. Novatek is also creating the Kola shipyard near Murmansk to be completed next year.

The Murmansk terminal is to have two LNG storage tankers, and may allow selling LNG on FOB conditions, Prime said citing Mikhelson's presentation.

The transshipment terminal, located on the way from Yamal to Europe, would strengthen the company's positions in the global LNG market, Mikhelson said.

"We are losing and will continue losing in transportation with icebreaking tankers," he said, adding freight involving icebreakers is 70%-80% more expensive than regular freight, Vedomosti business daily wrote citing Tass news agency.

Transshipment will take place in ports where water does not freeze, boosting the efficiency of using the ice-class fleet, he said without giving the project's cost or timeframe.

FLAG WAIVER

Analysts at VTB Capital expect the Murmansk terminal's financing would be similar to the Rb108 billion ($1.6 billion) Kamchatka terminal, which could help save $0.20/MMBtu on transportation costs, they said in a Tuesday note.

"The planned transshipment terminals in Kamchatka and Murmansk might help Yamal LNG save on transportation costs in the Asian direction and optimize shipments to Europe," they said. "We view the company's focus on cost optimization as positive, while the attraction of project financing and state support would help the company strengthen its balance sheet."

Yamal LNG is to consist of three 5.5 million mt/year trains and a fourth 900,000-940,000 mt/year. Novatek, which launched the second train in late July, expects the first three trains to reach full capacity next year, with the fourth train coming online late in the year.

The company plans to launch its second LNG plant, the 19.8 million mt/year Arctic LNG-2, to be located across the Bay of Ob, in 2022-23.

Meanwhile, to facilitate shipment between Sabetta and the terminals either in Murmansk or Kamchatka, Novatek has asked the Russian transportation ministry to allow it to use Arctic class tankers under flags other than Russian, Mikhelson said, adding that the law currently bans the company from using its 15 Arc7 tankers of Yamal LNG.

This would be an exception to the maritime code amendments suggested by the industry and trade ministry that would limit access to the NSR to tankers traveling under the Russian flag, Mikhelson said.

The February 1 edition of the code bans tankers under foreign flags to transport oil, gas, including LNG, and gas condensate produced in Russia and loaded in the NSR waters or to store it in a tanker in the NSR waters as of December 20, 2018.

Mikhelson also reiterated his stance against the industry and trade ministry's proposals to ban foreign-made LNG tankers from being used on the NSR.

Novatek is also still considering the number of Arc7 tankers it will need for the Arctic LNG-2 project, he said, adding it depends on the "timeliness" of the decision on both transshipment terminals.

--Nastassia Astrasheuskaya, nastia.astrasheuska@spglobal.com

--Edited by Jeremy Lovell, jeremy.lovell@spglobal.com