Vladivostok, Russia/Singapore: The $21 billion Arctic liquefied natural gas (LNG)-2 project led by Russian private gas producer Novatek won a green light on Thursday, the latest in a raft of new projects aimed at meeting a likely doubling of LNG demand over the next 15 years.
Arctic LNG-2 is expected to launch in 2023 and will aim to export 80 percent of its LNG to Asia, Novatek Chief Executive Leonid Mikhelson, Russia's richest businessman according to Forbes magazine, said after the project's partners signed a final investment decision (FID) at an economic forum.
At nearly 20 million tonnes per annum (mmpta) of LNG it would be largest single project to reach FID, according to Wood Mackenzie, and take total LNG volumes sanctioned this year to about 63 mtpa, beating the previous record of 45 mmtpa in 2005.
Arctic LNG 2 will be the third LNG project for Novatek, which hopes to match Qatar in production of the super-chilled fuel.
"Novatek is clearly driving home their ambitions to be a global LNG power house," said Chong Zhi Xin, associate director of gas, power and energy at IHS Markit.
"It adds another 12 million tonnes to their portfolio on an equity basis. They are emerging as one of the largest LNG suppliers in the market."
The project's equity partners include French energy producer Total, China's National Petroleum Corp, CNOOC and the Japan Arctic LNG consortium, made up of Mitsui & Co and state-owned JOGMEC, formally known as Japan Oil, Gas and Metals National Corp.
"This is an important project for Russia and follows our strategy to create capacities for LNG production," Russian Energy Minister Alexander Novak said, adding that investments in the project had been set at $21 billion.
Japanese Industry Minister Hiroshige Seko said the project is one of the largest in the history of Japanese-Russian relations.
"It will unite Japan and Russia even more, as well as Europe and Asia. The Japanese government will provide all necessary assistance for the realization of this project," he said.
The Arctic LNG 2 project will include construction of three LNG trains with a capacity of 6.6 million tonnes per annum (mtpa) of LNG each and at least 1.6 mtpa of gas condensate, according to Novatek's website.
It will help Russia reach its goal of producing 120 to 130 million tonnes of LNG a year in the coming years and raise its share in the global LNG market to up to 20 percent.
It follows FIDs announced from Canada, the United States and Mozambique earlier this year and plans to target Asian demand driven by major economies shifting towards greener fuel to combat pollution.
The project will benefit from extremely low cost gas, helping it compete against LNG from the United States and Canada despite higher shipping costs during winter when ships have to travel via Europe instead of the Northern Sea route, said Wood Mackenzie analyst Nicholas Browne.
The increase in supply from Russia and more intense competition may push down LNG prices and help move Asia towards a more gas-based economy, said IHS Markit's Chong.