Saipem seen getting work in Novatek's Arctic LNG 2 project

MOSCOW (Reuters) — Italy's Saipem is likely to get a sub-contractor role in a new project to produce LNG in the Arctic by Russia's Novatek, one of Novatek's partners said.

Photo courtesy of Novatek.

Novatek, Russia's largest non-state LNG producer, is aiming to produce as much LNG as the world's biggest exporter Qatar and is drawing up plans to build a second plant, known as Arctic LNG 2, on the Gydan Peninsula that juts into the Kara Sea.

Production is due to start in 2022–2023.

Four sources told Reuters earlier this month that Saipem was expected to be chosen to build offshore platforms for the facility.

"It is planned that Saipem will take part as a sub-contractor to design the gravity-based units. That's where they have expertise and experience," said Boris Lim, head of NIPIGAZ, an engineering firm on the project and a Novatek partner.

The gravity-based units will sit on the seabed some 24.85 mi from the onshore gas deposit and will produce and ship LNG, Leonid Mikhelson, Novatek's Chief Executive Officer, said.

Mikhelson told reporters in comments cleared for publication on Monday that Novatek was also in talks with Saipem to possibly give the Italian firm a partner role in managing the company that will oversee the shipyard which is to be built on the Kola Peninsula in north-west Russia.

He said more foreign firms might also participate.

Novatek started building the wharf—expected to cost $1.3 B–$1.5 B—last month. The first dock is expected to be ready in 2019.

Mikhelson, Russia's richest businessman according to Forbes magazine, said Arctic LNG 2 would have three lines with a capacity of around 6 MMtpy each.

The Utrenneye gas field will be the resource base for Arctic LNG 2. "We have defined production capacity at just over 30 Bcm per year... which is enough to compensate for the project's costs," Mikhelson said of the gas field.

For now, Russia has just one operational LNG facility, run by Gazprom on the Pacific island of Sakhalin.

Novatek is due to start producing LNG at its Yamal LNG project in the fourth quarter. That project will eventually produce around 16.5 MMt of LNG per year.

Mikhelson said Novatek was in talks with a number of companies to join Arctic LNG 2, including his current partners in Yamal LNG which is co-owned by France's Total, and China's CNPC and the Silk Road Fund.

Novatek is under US sanctions over Moscow's role in the Ukraine crisis, which limits the company's ability to deal with US financial entities. Novatek raised financing for Yamal from China, Russia and some European lenders.

Reporting by Oksana Kobzeva; Writing by Vladimir Soldatkin and Denis Pinchuk; Editing by Andrew Osborn and Mark Potter

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