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Sakhalin-1 Awards Russia Far East LNG Feed Contract

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The Exxon Mobil-led Sakhalin-1 consortium has awarded a Feed (front-end engineering and design) contract for its planned Russia Far East LNG (RFE LNG) project to TechnipFMC and Japan's JGC. "The Sakhalin-1 consortium believes this is a substantial step toward the success of the RFE LNG project," Shelley Beer, president of Exxon Neftegas, told the Sakhalin Oil & Gas Conference organized by Adam Smith Conferences. Exxon Neftegas operates Sakhalin-1 with a 30% stake. The consortium's other members are Rosneft with 20% (via two subsidiaries), Japan's Sodeco consortium with 30%, and India's ONGC Videsh with 20%. RFE LNG could start operating by 2027 and would add 6.2 million tons per year of liquefaction capacity in Russia's Far East. It is located close to key Asian markets, including Japan, South Korea and China. The project is one of a dozen that Moscow hopes will help it to gain more than 120 million tons/yr of the global LNG market in the next 10-15 years. By choosing TechnipFMC and JGC, Exxon is betting on the experience that the duo acquired by performing engineering, procurement and construction (EPC) work on Novatek's Yamal LNG project, which started operating in 2017. TechnipFMC is also an EPC contractor at Novatek's Arctic LNG 2 project, which is scheduled for start-up in 2023. "TechnipFMC and JGC are well-experienced contractors in both LNG and modular megaprojects in similar climate conditions," Beer told the Sakhalin conference on Wednesday. Exxon started pre-Feed work at RFE LNG last year, casting a shadow over a rival project proposed by Gazprom and Royal Dutch Shell to expand their Sakhalin-2 LNG plant. Those two companies had wanted to use gas from Sakhalin-1 to feed a new third train at Sakhalin-2. Gazprom's upstream chief Sergei Menshikov said on Wednesday that talks with the Sakhalin-1 consortium continue. But Energy Intelligence understands that the Sakhalin-2 partners will need to explore for another source of gas supplies in the region (IOD Sep.25'19). Sakhalin-2, with a current capacity of around 11 million tons/yr, is the only LNG project that is already operating in Russia's Far East. However, Novatek has plans to produce up to 70 million tons/yr of LNG in the West Siberian Arctic by 2030 and also plans to build a 20 million ton/yr LNG transshipment terminal on the Kamchatka Peninsula to reduce the cost of delivering Arctic LNG to Asia. The first phase of the Kamchatka terminal has a target completion date of February 2023, with the second phase following in 2025-26, Novatek's Deputy CEO Mark Gyetvay told the Sakhalin conference. Novatek also plans another 20 million ton/yr transshipment terminal in Murmansk for westward deliveries, with a first phase to be completed in December 2022 and the second in 2025-26, Gyetvay said. Vitaly Sokolov, Moscow

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