Ust-Luga to Choose Between Air Products, Linde Technology

Gazprom and RusGazDobycha will choose between Air Products and Linde liquefaction technologies for the Ust-Luga gas processing and LNG plant in Northwestern Russia, RusGazDobycha CEO Konstantin Makhov said in an interview with the Interfax news agency on Tuesday. Neither technology provider is new to Russia, which remains reliant on foreign liquefaction technology despite Novatek’s attempts to develop its Arctic Cascade process into a working technology (LNGI Mar.15'21). The Kremlin would like to see Russian companies rely more on Russian technology -- to avoid sanctions imposed by the West. The 45 Bcm Ust-Luga plant will have a 13 million ton/yr LNG facility, scheduled in 2024. It is part of Russia’s plans to monetize gas reserves through higher-margin petrochemicals and LNG production. Russia aims to produce up to 140 million tons/yr of LNG by 2035, up from around 30 million tons in 2020. Both technology providers should submit their final bids this month, after which the project operator, the RusKhimAlyans joint venture between Gazprom and RusGazDobycha, will make a decision, according to Makhov. Linde has recently agreed preliminarily to sign an engineering, procurement and site services (EPSS) contract for the gas processing part of the project (LNGI Mar.26'21). If RusKhimAlyans chooses to use Linde’s liquefaction technology for the LNG facility, Linde is understood to also get an engineering, procurement and construction (EPC) contract for that part. If Air Products technology is selected, then TechnipFMC is expected to act as an EPC contractor. Linde provides its technology to Gazprom’s 1.5 million ton/yr Portovaya LNG facility on the Baltic Sea coast scheduled later this year and to Novatek’s 19.8 million ton/yr Arctic LNG 2 plant scheduled for commercial operations in 2023. Air Products provided its technology for Novatek’s flagship Yamal LNG plant launched in 2017. Ust-Luga will start supplies from its two trains in 2024 and 2025. The initial plan has been to start the trains in late 2023 and late 2024, but Makhov said that was the timeline for completion of construction, not for the start of commercial operations. The gas processing plant will supply ethane to the nearby Baltic Chemical Complex that RusGazDobycha starts building this month. Construction of the Ust-Luga gas processing and LNG plant may also start this year, although RusGazDobycha did not provide an exact timeline. Front-end engineering and design (Feed) work will be completed at the end of April, Makhov said, although Gazprom already in 2019 made a firm decision to move on with the project. After Feed stage is completed, pre-marketing may start, Makhov said. Gazprom Export, the gas giant’s key export arm, will handle the marketing, although RusGazDobycha will also participate, Makhov said. An option where Gazprom will be the sole or anchor offtaker is also being considered, he said. Gazprom’s giant Tambei group of fields in the Arctic may feed Ust-Luga at a later stage, Makhov confirmed. A source close to the project earlier told Energy Intelligence that ethane-rich Tambei gas may gradually substitute for the gas from the Nadym-Pur-Taz area in West Siberia, the initial resource base of Ust-Luga. Tambei may start producing gas in 2026, Makhov said. However, Novatek has asked Russian leader Vladimir Putin to make Gazprom sell Tambei, which could significantly expand Novatek’s resource base for its ambitious LNG projects in the Arctic (LNGI Apr.19'21). RusGazDobycha doesn’t plan an LNG facility in the Arctic, Makhov said, arguing that transportation costs will be too high. Floating liquefaction facilities might be an option, however, as they do not require costly port infrastructure, he said. From Ust-Luga, transportation of LNG will cost 60¢-80¢/MMBtu, and even lower for some European markets, Makhov said. Europe, Turkey and partly Africa will be the key sales markets, he said. In Europe, it will focus on markets where Gazprom’s pipeline gas doesn’t reach or has a limited share, such as Spain or Italy, Makhov argued. In Turkey, however, Gazprom already faces tough competition from LNG. To supply Tambei gas to Ust-Luga, Gazprom will need to reserve a separate line for ethane-rich gas in the northern corridor, Makhov admitted, but said that infrastructure is almost there. Part of the northern corridor will already have a separate line for ethane-rich gas from Nadym-Pur-Taz. Vitaly Sokolov, Moscow