Russian Oil and Gas Industry: News #4

Installation of the first line of Arctic LNG 2 on the Gydan Peninsula completed

PJSC NOVATEK announced the completion of the installation of a gravity-based gas liquefaction line on a prepared offshore base in the water area of ​​the Utrenny terminal on the Gydan Peninsula — the first stage of the Arctic LNG 2 large-capacity LNG plant. The process line is being connected to onshore gas production facilities to complete commissioning and launch LNG production.

The production line with a capacity of 6.6 million tons of LNG per year was towed by sea from the Center for the Construction of Large-Tonnage Offshore Structures (TsSKMS) in the Murmansk Region to the Gydan Peninsula and installed on a prepared offshore base in the coastal zone. The unique offshore platform towing operation was completed in just 22 days. The platform weighs 640,000 tons and is the heaviest moving object in the history of the global LNG industry, with a length of 330 m, a width of 152 m and a height of 90 m.

The line consists of a gravity-type concrete base with LNG and gas condensate storage tanks, on which topside modules with process equipment for the production and shipment of LNG and stable gas condensate are mounted.

An important stage in the implementation of the Arctic LNG 2 project has been completed - sea towing of the LNG production line fully assembled at TsSKMS and its installation at the Utrenny terminal. The applied innovative concept of construction on gravity foundations allows for the rapid commissioning of new gas liquefaction facilities and reduces capital costs. A unique advantage of the production base of TsSKMS in the Murmansk region is the ability to mass-produce liquefaction lines: now the second stage of construction of the second line of the Arctic LNG 2 project is underway, and work on the concrete foundation of the third line is already beginning.

EU imports of Russian LNG have jumped by 40% since the invasion of Ukraine

EU countries are estimated to have spent nearly €5.3bn buying over half of all Russia’s LNG during the first seven months of 2023, with Spain and Belgium the second and third largest buyers worldwide

Countries in the European Union are buying significantly more Russian liquified natural gas (LNG) now than they did before the invasion of Ukraine, with Spain and Belgium only just beaten by China as top buyers, according to Global Witness analysis of Kpler data. [1]

Between January and July 2023, EU countries bought 22 million cubic meters of LNG, compared with 15 million cubic meters during the same period in 2021 – a jump of 40%. [2] Using Russian LNG prices estimated by the Centre for Research on Energy and Clean Air based on spot and monthly trade values, Global Witness projects the EU’s 2023 purchases to be worth €5.29 billion. [3]

This is a much sharper rise than the global average increase in Russian LNG imports, which stands at 6%. EU countries now buy the majority of Russia’s supply, propping up one of the Kremlin’s most important sources of revenue. Between January and July 2023, the EU bought 52% of Russia’s exports, compared to 49% in 2022 and 39% in 2021.

In March 2023, EU Energy Commissioner Kadri Simson urged member states and EU companies to stop buying Russian LNG. And Spanish Energy Minister Teresa Ribera asked Spanish buyers not to sign new Russian LNG contracts, calling the situation ‘absurd’.

Recent research by Global Witness has revealed that Shell and TotalEnergies have continued to trade Russian LNG following the invasion. Global Witness analysis in July 2023 showed Total is the biggest non-Russian buyer of liquified gas from the country, buying nearly 4.2 million cubic meters of Russia’s LNG since the start of the year. And earlier Global Witness analysis revealed that between March and December 2022, Shell bought and sold 12 percent of all of Russia’s exports, over 7.5 million cubic meters of LNG.

Spain is now the second largest buyer of Russian LNG worldwide, with Belgium close behind. During the first seven months of 2023, Spain took 18% of Russia’s total sales, while Belgium took 17%. China bought 20%. During the same period in 2021, Spain ranked 5th and Belgium 7th.

Jonathan Noronha-Gant, senior fossil fuel campaigner at Global Witness said:

“Europe’s fossil gas-based energy system is a climate disaster and security risk, funding warmongering regimes and fuelling deadly extreme weather. That national capitals are buying more LNG from Russia than before the war shows that we are simply not moving fast enough to replace gas with renewables. Governments need to wake up to the reality of our dependence on fossil gas and come up with an emergency plan for a full phase-out – starting with a ban on the trade of the Russian gas which is lining Putin’s pockets.

“Buying Russian gas has the same impact as buying Russian oil. Both fund the war in Ukraine, and every euro means more bloodshed. While European countries decry the war, they ‘re putting money into Putin’s pockets. These countries should align their actions with their words by banning the trade of Russian LNG that is fueling both the war and the climate crisis”

higurashihougi wrote:AFP (France) and other pro-Western outlets just announced that net income of Gazprom decreased 8-fold, "net profit for January-June 2023 fell to 296 billion rubles ($3.1 billion) from 2.5 trillion rubles over the same period last year."

Some people said that the EU governments are determined to cut Russian gas and oil revenue, even at the expense of EU's own citizens (EU force their own people to reduce gas spending and suffer horribly under freezing weather, etc etc).

“Buying Russian gas has the same impact as buying Russian oil. Both fund the war in Ukraine, and every euro means more bloodshed. While European countries decry the war, they ‘re putting money into Putin’s pockets. These countries should align their actions with their words by banning the trade of Russian LNG that is fueling both the war and the climate crisis”

Most likely, when the war is over volumes to Europe will increase, as current situation is not beneficial for both sides and significant deliveries to China will take another decade, at least.

caveat emptor wrote:

higurashihougi wrote:AFP (France) and other pro-Western outlets just announced that net income of Gazprom decreased 8-fold, "net profit for January-June 2023 fell to 296 billion rubles ($3.1 billion) from 2.5 trillion rubles over the same period last year."

Some people said that the EU governments are determined to cut Russian gas and oil revenue, even at the expense of EU's own citizens (EU force their own people to reduce gas spending and suffer horribly under freezing weather, etc etc).

Last year was anomaly, as prices were record high with high volumes. With that said, Gazprom gas production is about 15% down this year (reduction coming mostly from Bovanenkovo), since European volumes declined substantially.
Most likely, when the war is over volumes to Europe will increase, as current situation is not beneficial for both sides and significant deliveries to China will take another decade, at least.

higurashihougi wrote:
Honestly speaking, I am a bit concerned. Objectively speaking, is it a not a big issue, and in the unfortunate case if it is, at which level it may affect Russian budget income, economy and people's welfare in general and what is Kremlin's response to the situation.

GarryB wrote:
Russia should never supply Europe first and cheapest ever again, because the last time they did that the wealth and surplus that created in Europe was used to try to destroy the Russian economy and kill Russian soldiers.

GarryB wrote:But an interesting development is taht the changes made with the conflict in Ukraine has allowed Russia to clean house so exported Russian oil and gas will actually go to Russia and not foreign owners so even a drop of 50% in revenue is still a huge boost to the Russian economy... watch this:

They've chosen to supply gas to European markets at the prices they did for three reasons. First was that they preferred long term contracts with fixed price instead of selling at the prevalent market price. It made planning of export and budget revenues easier in the long run. Second reason was that they went for increased market share instead of maximizing profits with less exports. Third is that pipeline exports are preferred over LNG and that they didn't ( and still don't have sufficient export volumes via LNG).

As for making Europe first option, there was really no second option. In a sense there still isn't for gas produced in Yamal. Gas for China goes from completely different sources.

They were not made to sell gas for "cheap" prices, it was government decision.

Winners of current clash are US, Norway, Algeria and other natgas exporters to EU, while losers are EU and Russia. As simple as that.

Misleading, low quality video, as per usual from this source. Japanese kept 30% of the project, as did Indians keep their 20%. Since Rosneft owned 20% before Exxon withdrawal, Russian gov owns 50% including RN part. Video made it sounds like Russia now owns whole project, even if they quoted ownership structure in the beginning.

The average price for Urals oil in January-August 2023 was $56.58 per barrel, in January-August 2022 - $82.13 per barrel.

The average price for Urals oil in August 2023 was $74.0 per barrel, which is 1.001 times lower than in August 2022 ($74.73 per barrel).

North Sea Dated oil price in August 2023 was $86.20 .

GarryB wrote:
It was corruption bought and paid for.

I disagree, this is going to break up the west and separation from the west is the best possible result for Russia... they would have dragged her down and corrupted her too.

And it is not just this, there are dozens of situations where companies based in Cyprus own power stations and heating plants in Russia who are suddenly finding taxation agreements being ended so they are now paying double taxes and closing their HQs in Cyprus means foreign owners can no longer steal money from the Russian economy.

Corruption by whom? Gazprom has a monopoly on pipelined natgas exports and it is controlled by Russian government. Alexei Miller has been running the place for last 20+ years. They are calling shots in nathas contract prices and deliveries.

I don't think Russia needs help in getting corrupted. It is doing just fine in that department on its own.

Companies in Cyprus are mostly owned by Russians and not foreigners.

Ex-owner of power stations that was ripping off Russian citizens by price gouging, that you mentioned, is actually Russian minister for 6 years in Medvedev's cabinet.

GarryB wrote: