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Saipem set for Arctic LNG 2 platform contract

MOSCOW (Reuters) — Russian gas producer Novatek is expected to select Italy's Saipem to build offshore platforms for its second LNG facility in the Arctic, four sources said.

Yamal Lng Project Novatek Resized
Photo courtesy of Novatek.

Novatek 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.

"The contract is not signed yet, (but Saipem) are expected to become a subcontracting party for the Technip-Linde-NIPIGas consortium," one source close to the project said.

A second source familiar with the details confirmed that Saipem was expected to work as a subcontractor to build the LNG units, which will be gravity-based platforms near the coast held in place on the seabed with ballast.

Novatek and Saipem did not respond to requests for comment.

In May, Novatek signed an agreement with Technip, Linde and the Russian Research and Design Institute for Gas Processing (NIPIGas) to design and develop gravity-based LNG facilities for Arctic LNG 2. Novatek has also agreed to buy Linde's licence for gas liquefaction technology for the plant.

The fact that Novatek has now chosen all four main contractors suggests the Russian company is serious about proceeding with the project, which is expected to start operating in the early 2020s.

One source with direct knowledge of the matter said Novatek would start drilling its first exploratory gas wells in 2018.

Two more sources, one close to Saipem and a Western energy source, said the gravity-based structures should allow Novatek to build the plant more cheaply than its first Arctic LNG project at Yamal. They did not give an estimate of the savings.

Arctic LNG 2 is expected to have an output matching or exceeding Yamal. Its first line, which will produce 5.5 MMt of LNG a year, is expected to be launched later this year and Yamal will be producing 16.5 MMt by 2019.

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

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.

A source close to Saipem and a source close to the project said the company was expected to build the platforms in the northwestern region of Murmansk. They would then be delivered by sea to Gydan, some 1,245 mi away.

Reporting by Katya Golubkova and Denis Pinchuk; Additional reporting by Oksana Kobzeva and Stephen Jewkes in Milan; editing by Andrew Osborn and David Clarke

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