Moscow ponders over future for Arctic natural gas

Russia has over many years invested vast sums in the development of the natural gas reserves of the Yamal Peninsula, and companies Gazpom and Novatek now operate some of the country’s biggest industrial projects in the region.

However, the current shift in international energy markets away from fossil fuels could ultimately lead to catastrophe for the export-oriented Russian oil and gas sector. Unless radical adjustments are made.

In December last year, the country’s First Deputy Prime Minister Andrey Belousov set up a working group that is to propose ways forward for the energy region.

Powerful companies such as Gazprom, Novatek, Gazprom Neft, Rosatom, Sovcomflot, Russian Railways and the Russian Direct Investment Fund are all represented in the group, newspaper RBC reports. In addition come several leading government officials, among them Deputy PM and former energy minister Aleksandr Novak.

On the agenda is the possible development of petrochemical industry in the region, including the production of plastics products. The vast natural gas resources in the region can also be applied for production of hydrogen, state planners argue.

According to RBC, the working groups is to present its proposals by the end of March.

Vast resources

The oil and gas of the Russian north is of great national importance. Natural gas reserves in Yamal alone are estimated to more than 26 trillion cubic meters. In addition comes major reserves in the nearby Gydan Peninsula, as well as the adjacent Arctic shelf.

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According to regional authorities in the Yamal-Nenets region, a total of 526,9 billion cubic meters of natural gas was produced in the region in 2020. In addition comes 37 million tons of oil and 23,3 milion tons of condensate. In 2021, natural gas production is due to increase to 639,9 billion cubic meters, the regional government informs.

Gazprom’s Bovanenkovo field alone produces up to 115 billion cubic meters annually, most of which was pipelined westwards to European consumers, while Novatek’s Yamal LNG in the course of the 2020 delivered more than 16 million of liquified natural gas to the markets.

And more is to come. Several new projects are under development, among them Novatek’s Arctic LNG 2, Gazprom’s Kharasaveyskoye and Gazprom Neft’s Kamennomysskoye-More. And many more are planned developed over the next decade.

Gas processing

In December 2020, President Vladimir Putin attended a meeting on petrochemical industry development in the Siberian town of Tobolsk

“We have to more actively promote Russian petrochemical production domestically and abroad and boost efficiency and production volumes,” Putin underlined in the meeting and made clear that several major projects worth about 5 trillion rubles are under planning.

According to the President, a total of 14 projects on new petrochemical production are on the table. Including in the Arctic.

However, there are diverging opinions over how to exploit the resources and where to do the processing. Petrochemical company Sibur argues that it will be far cheaper and convenient to process the natural gas in eastern Siberia, near Asian markets, instead of building new processing plants on the harsh tundra lands of Yamal.

But the natural gas companies might see the issue otherwise.

Representatives of Gazprom already in 2019 made clear that they are planning the construction of a gigantic petrochemical plant in Bovenenkovo, the company hub in the Yamal Peninsula, that is to be able to produce about 3 million tons of plastics products polyethylene and polypropylene per year.

LNG

Russia is also likely to forge ahead with its LNG projects in the region. In a government meeting this week, Deputy Premier Novak underlined that a tripling of LNG production in Yamal is planned over the next 15 years. By year 2035, up to 140 million tons of LNG will be produced in and around Yamal, Novak said.

He also explained that 10 new LNG projects are under planning in the country. Among them are projects for the fields of Yuzhno-Tambeyskoye, Utrenneye, Geofizicheskoye in Yamal, as well as projects in Taymyr and in offshore Arctic waters.