Russia gives Yamal LNG go-ahead to continue exports to Germany

Russian authorities are allowing the country’s largest liquefied natural gas project to continue exporting LNG to Germany’s key gas importer and distributor, Sefe Marketing & Trading.

Sefe was was previously known as Gazprom Marketing & Trading but changed its name after the German government took control of the company following Russia’s invasion of Ukraine.

Gazprom Marketing & Trading was a subsidiary of Russian gas giant Gazprom that managed some of the parent company’s gas exports to Europe and also traded third-party LNG cargoes.

The Kremlin banned all Russian companies from dealing with Sefe after it was created in mid-2022, but issued a temporary exemption for the Novatek-led Yamal LNG operator, which has a long-term contract with the German company to supply 2.9 million tonnes per annum of LNG.

Yamal LNG’s exemption previously had to be renewed every 90 days, but will now remain in effect until 31 December 2024 after being signed by Prime Minister Mikhail Mishustin and published this week.

The operator last year reaped profits after diverting LNG cargoes from Asia to Europe in a bid to exploit the extremely high gas prices on the continent that had been triggered by the halt in Gazprom’s gas pipeline supplies.

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Subsequently, Novatek executive chairman Leonid Mikhelson earlier this year expressed his strong belief that European customers are as interested as ever in buying LNG from Russia, despite the Ukraine conflict.

Replacing Western expertise

The exemption for Yamal LNG and its affiliated trading subsidiary Yamal Trade comes soon after Novatek’s announcement that the company is no longer dependent on Western expertise for the large scale liquefaction processes it had used at Yamal LNG and its upcoming development, Arctic LNG 2.

International sanctions have prevented imports of high-tech Western equipment for Russian LNG projects, pushing Novatek to search Russia, China and elsewhere for companies that can manufacture suitable replacement parts.

The search resulted in Russian authorities approving a Novatek patent application for an in-house liquefaction process based on predominantly Russian-manufactured equipment, Arctic Mix — Novatek having already gained patents for its Artic Cascade and Arctic Cascade Modified processes.

The company claims that Arctic Mix could support a train with an output capacity of 6 million tpa of LNG, with the process involving three phases of cooling and liquefying incoming natural gas with mixed refrigerants to turn it into liquid.

It added that one main difference between Arctic Mix and other long-standing methods is the special concentration of solutions to help reduce the breakdown rate for pumps and compressors used in the process.

Currently, Novatek has built just one train using its Arctic Cascade process — a supplement to three large trains at Yamal LNG and with an output of less than 1 million tpa.

Novatek earlier this year said that the Arctic Cascade Modified version may support a single train with a production capacity of 3 million tpa.

Belokamenka yard issue

The progress with its three liquefaction processes has helped ease the initial impact of Western sanctions on Novatek, which had put in doubt the company’s ambitions to more than triple LNG exports from its Russian projects to about 70 million tpa by 2030.

Soon after the sanctions were announced, Novatek reportedly offered Argentina its services to build an LNG export plant for the South American country’s Vaca Muerta shale play, which the scheme based on floating concrete gravity-based foundations (GBS) similar to Arctic LNG 2, according to Reuters.

The GBS units would be built at the large, specialised yard near the village of Belokamenka in northern Russia that Novatek constructed to mass produce GBS-based LNG trains for its Arctic LNG 2 and Arctic LNG 1 developments.

However, Argentina’s Energy Secretariat said “there are no negotiations” with Novatek, when responding to a Reuters query about the offer by the Russian company.

Earlier in June, Novatek told selected Russian media outlets that the Belokamenka yard was chosen to construct liquefaction trains for its newest proposal, an LNG plant near Murmansk with three trains and capacity of more than 20 million tpa.