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Russia is a giant of oil & gas. With reserves as high as 109.5 billion barrels of oil and 32.3 trillion cubic metres of natural gas, it holds its own as the world’s top oil and second biggest gas producer. Naturally, that makes it home to some truly massive projects. With that in mind, let’s check out some of the megaprojects, deals, and exploration efforts forming the foci of Russian oil & gas activity in 2018 and the future.
Amur Gas Processing Plant, Amur
Cost: $22.1 billion
Timeframe: 2015-2021
The cost and scope of Gazprom’s Amur Gas Processing Plant has been bumped up thanks to the recent pressure on global energy markets. It was already Russia’s largest ever LNG project when it was first conceived with a projected cost of $12.7 billion. Now, with its hefty $22.1 billion price tag, Amur is certainly up there with the nation’s foremost developments.
Phase one, originally scheduled for completion in 2019, is now targeted for 2021, when first gas will be produced. At its peak, Amur will be pumping out over 42 billion cubic metres of natural gas and related products annually. Resources will be sourced from the Yakutia and Irkutsk gas fields via the under-construction Power of Siberia pipeline.
In April 2017, China Petroleum Engineering & Construction (CPECC) secured an EPC contract for Amur. CPECC will be building and supplying Amur’s critical production facilities, including a helium block boasting a 60 million cubic metre capacity. In fact, with the installation of this colossal piece of equipment, Amur Gas Processing Plant will become the largest helium production facility by capacity in the world.
Lukoil-Iran Caspian Exploration, Caspian Sea
Cost: N/a
Timeframe: 2018 – ongoing
The Caspian Sea, with its enormous resources and five-nation coastline, could be the site of international conflict. Instead, it’s a hotbed of cooperation. Lukoil, for instance, inked deals with the National Iranian Oil Company to jointly explore offshore territories for more oil & gas deposits.
Agreements were signed in Moscow in October 2017 after months of negotiations on geological exploration in the Caspian’s southern regions, close to Iran’s territorial waters. This is a historic deal, representing the first time Russia and Iran have joined together to develop hydrocarbons in the Caspian – and likely heralds closer energy cooperation in the future.
Lukoil recently boosted its Caspian output with the completion of its Vladimir Filanovsky field expansion efforts earlier in 2017. With the addition of a new well, Lukoil has added a further 5 million tons a year to its output.
Iran too has discovered its own significant finds in the Caspian. The Sardar-e-Jangal Field holds an estimated 1.4 trillion cubic metres of recoverable gas, and around 500 million barrels of crude. It is reckoned that Sardar-e-Jangal could become Iran’s first Caspian field development project.
Gazprom Moscow Oil Refinery Modernisation Project, Moscow
Cost: $1.5 billion
Timeframe: 2013-2020
Gazprom’s Moscow Oil refinery has been on the receiving end of a far-reaching upgrade programme since 2013. Measures and machinery implemented during this time have allowed the plant to drastically lower its environmental impact, alongside exclusive production of Euro-5 gasolines and diesel fuels.
The second modernisation is currently underway at the 12.15-million-ton capacity refinery. General contractors Nipigaz is installing a wide range of technologies, transforming Gazprom’s Moscow refinery into a Euro+ Combined Oil Refining Unit (CORU).
Currently being installed at Moscow are:
• A 6 million ton/year primary atmospheric-vacuum distillation unit (CDU-VDU 6)
• A 1 million ton/year gasoline reforming unit
• A 2 million ton/year diesel hydrotreating unit, incorporating an iso-dewazing unit
• A gas fractionation unit
• An amine regeneration unit
With the implementation of these measures, Gazprom will have built a thoroughly modern complex, capable of producing all Euro classification fuels with a reduced environmental impact. Phase two is on course to end in 2018, with the final project completion date set at 2020.
Nord Stream 2
Cost: $9 billion
Timeframe: 2016-2019
Work on Russia’s most controversial pipeline continues to roll onwards. According to Gazprom, the project’s chief instigator and majority partner, all contracts for Nord Stream 2’s construction have been signed, with Gazprom ready to go.
“Preparation for the gas pipeline construction start is in full swing. Contracts were executed for the time being for all basic materials, equipment, and services needed to implement construction work,” Gazprom said in a statement in December 2017.
Originally slated to transport gas from Vyborg to a transmission station at Greifswald on Germany’s northern coast, Nord Stream 2 may be taking a detour. Nord Stream 2 AG, the pipeline’s operating consortium, said it is seeking alternative routes.
Currently, the pipeline will pass through Danish waters in the Baltic Sea, but weighing of pipeline viability against Danish national security has the potential to change Nord Stream 2’s geographic direction.
Denmark may introduce legislation restricting Russian access to its waters, hence Nord Stream 2 is considering other route options.
Still, Gazprom is unlikely to let this project fail – not while European gas demand is rising. Research firm Platts stated in January 2017 that the outlook is healthy for suppliers, which explains why Gazprom is so willing to persevere with Nord Stream 2.
Once complete, Nord Stream 2 can add an additional 27.5 billion cubic metres to European supplies. If all goes according to schedule, the pipeline should become operational in 2019.
Yamal LNG Plant, Siberia
Cost: $7bn-$27bn
Timeframe: 2016-2018
Despite being the world’s number two natural gas producer, Russia isn’t a top five global LNG exporter. Trying to break other country’s dominance, especially global leaders Qatar, and bump up exports is vitally important for the Putin administration. That’s why the nation is spending big on gas projects – like the massive Yamal LNG plant in Northwest Siberia.
Yamal, which has been spearheaded by government-backed independent Novatek, can produce up to 5.5 million tons a year. Much of Yamal’s output is expected to serve the Chinese market, following Russia and China’s $400 billion, 30-year gas delivery agreement established in 2014.
Yamal will also send Russian gas to other Asian markets. In fact, first cargoes have been sold to Malaysia’s Petronas. This initial batch of Yamal LNG, roughly 170,000 cubic metres, left the plant on board icebreaking tankers in December 2017. Ice breakers are integral to Yamal’s logistics efforts, as it is located in some of the world’s coldest waters. Temperatures at the site regularly drop below -20°C.
Full time production is predicted to start in 2018, where the plant’s long-term lifting contracts come into play. Until then, all sales of Yamal gas will be conducted on an on-the-spot basis. Novatek has also brokered transhipment deals with France’s Engie and Belgian company Fluxys to allow this Siberian gas to reach Europe.
Siberian exploration
Cost: $50 billion (est.)
Timeframe: 2018 – ongoing
Yamal is not the only production site in Siberia. There are numerous locations in Russia’s Far East and Arctic territories ripe for exploration. Russia already sits on a huge amount of oil and gas, but probing these regions could yield even more resources.
Not only would this ensure a stronger, more-stable economy for the country, it would also allow internationals to think about tie-ins and joint ventures. Manufacturers of E&P equipment could score some big contracts too.
So where are they looking? According to Sergey Donskoy, Head of the Ministry of Natural Resources, has stated geological exploration of Far Eastern and Arctic fields is the key to Russia’s energy future. Speaking in Vladivostok in October 2017, Donskoy has said the priority lies in investigating the Western Siberian Plate, and East-Siberian Platform.
Exploration has been ongoing for some time, with the Irkutsk Oil Company being awarded licenses in 2014 to investigate the Leno-Tungus oil field, for instance, but much, much more investment is coming to the Far East. As much as $50 billion will be invested in oil, gas, and chemical projects there across the next three to five years.
Baltic LNG Hub, Leningrad Region
Cost: $18.5 billion
Timeframe: 2017-2023
We’ve already seen how Nord Stream 2 will impact Russia’s gas supplies via the Baltic. However, as it currently stands, Russia is lacking a true Baltic LNG facility to suit its production/supply ambitions. There is the private Gorskaya LNG hub, a project that seems to be moving on nicely, but Gazprom and Shell have ideas of their own.
The two majors agreed to set up a Baltic LNG joint venture in June 2017 after collaboration between the pair was first suggested in 2016. Now, feasibility studies are expected to begin in 2018.
The site chosen for this prospective hub, Ust-Luga, is Russia’s current largest mineral export port. But the cost of building here won’t come cheap. Ust-Luga port officials said they believed any such building work could amount to $18.5 billion in 2015.
Gazprom estimates that its proposed Baltic LNG hub could come online as early as 2022-2023. The plant is due to produce between 10-15 million tons of LNG annually at peak production.
MIOGE: The meeting place for Russian energy
If you want to meet the players behind these projects, and more major Russian developments, then you need to be at MIOGE 2018. As Russia’s leading international and technically-focused oil and gas event, the show welcomes over 600 exhibitors and 18,500 visitors from 35 countries around the world.
Participating in the exhibition is a great way to boost your sales in a new territory, while connecting with Russia’s top energy figures and leading technologically-focused players. Exhibit to meet and network with an audience full of key decision makers - including executives, company directors, procurement officers, engineering specialists, and more.
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