OIL, GAS AND CHEMICAL HANDLING

Russian LNG facilities: an emerging Baltic infrastructure

Dr Daria Gritsenko, Researcher, University of Helsinki, Helsinki, Finland

Proliferation of making it an attractive compliance added value” (Russian Energy Strategy (LNG) in the Baltic Sea region (BSR) option for operating in the Baltic 2030), which causes large-scale export of has recently been celebrated for two sulphur emission control area (SECA). un–or only slightly–processed gas and as reasons. Firstly, its flexible logistics allows Due to a diversity of potential uses a consequence lower incomes from sales. diversification of gas supply sources, (including maritime) and environmental Currently, six large-scale production and what with the escalation of political characteristics superior to oil-based energy facilities are scheduled for construction: tensions between the EU and Russia – sources, natural gas has been envisaged as Yamal, Gydan and Pechora in the prompted by the Ukrainian crisis – the a primary means to succeed in one of the Arctic, the Vladivostok and Sakhalin issue of energy independency has become most prominent contemporary challenges: projects in the Far East, and a Baltic particular relevant, as has the desire for energy transition. LNG plant in the Leningrad region gas supply diversification in the BSR. (Figure 3). According to the Russian Since LNG takes up only about 1/600th LNG facilities in the BSR Ministry of Energy, Russia is to increase the volume of natural gas, greater volumes The availability of LNG in the BSR its production capacity to 50-60 million can be stored at smaller facilities and has been limited due to the absence of MTpa by 2025. Therefore, The Russian delivered on-demand by ship, truck or adequate import infrastructure. Sweden’s Energy Strategy up to 2030 emphasises train. Therefore LNG is conceived as an (and the Baltic’s) first LNG terminal that development of seaport and transport ‘ideal candidate’ to improve European in Nynäshamn was opened in 2011, infrastructure for liquid hydrocarbon energy security. and in Autumn, 2014 import terminals transportation is among the most Secondly, used as a bunker fuel, LNG in Klaipeda (Lithuania) and Lysekil important strategic energy infrastructure significantly reduces SOx, NOx and PM (Sweden) followed. Now we observe a projects with the potential to enhance emissions in shipping exhaust fumes, boom in LNG facility construction around Russia’s position on foreign markets. the BSR. If current plans are realised, by Due to political and economic reasons, 2020 the BSR will have a dozen import Russia is also trying to diversify away facilities with total regasification capacity from Europe and sees its sales potential exceeding 15 million metric tonnes per primarily in Asian markets. annum (MTpa) (see Figure 1). The new terminals are mostly planned Baltic LNG plans as mid-sized (up to 100,000 MTpa) A plan for an LNG liquefaction facility import facilities that will serve three along the Baltic shore commenced purposes: diversify gas supply, assist in 2004 with the registering of a energy transition, and supply LNG for joint venture between and bunkering. In light of Russia’s ambitious Sovcomflot, however it was frozen at plans to significantly increase its share the planning stage. The facility, planned in the global LNG trade in the coming together with PetroCanda, Mitsubishi decade, it seems relevant to provide and was supposed to supply ca. 5 an overview of the upcoming Russian MTpa by 2010. The reason the project LNG facilities as a part of Baltic LNG was cancelled was the existence of a infrastructure development. commercially attractive alternative – an underwater gas pipeline, ‘’, Russia in the LNG market eventually launched in 2011. Yet in Natural gas is Russia's major energy autumn 2013, Gazprom announced its asset. Yet in the LNG market Russia was plans to revive the Baltic LNG project in a latecomer when production started in a new form and with new partners. 2009 in Sakhalin (see Figure 2). Lack of LNG was identified as one of the central Ust Luga Figure 1. Emerging Baltic LNG infrastructure problems of Russian energy policy as it The multi-purpose port Ust Luga was (as of 1.1.2015). Source: Serry and signifies “insufficient development of selected as a future site due to favorable Gritsenko, 2015. production of energy products with high climatic conditions (ice coverage during

134 Edition 67: September 2015 www.porttechnology.org OIL, GAS AND CHEMICAL HANDLING

Project Capacity Schedule Partners Country Supply to Supply (MTpa) market to EU in Yamal 10 (16.5) 2017 Novatek, Total, Cnpc 2013 (of total 447 Sakhalin I 5 2018 Rosneft, Exxon TWh ) Sakhalin II 5 2022 Gazprom, Shell, Mitsui, Mitsubishi Qatar 77.4 MT 51% Vladivostok 10 2018 Gazprom, Gazprombank Malaysia 23.1 MT < 0,1% Pechora 2.6 2018 Alltech, Rosneft Australia 20.8 MT < 0,1% Gydan (Arctic 1, 2, 3) 10 (15) 2018 Novatek Nigeria 20 MT 12% Baltic 10 (15) 2020 Gazprom, Gazprombank Indonesia 18.1 MT < 0,1% Kaliningrad 9 2017 Gazprom Trinidad 14.4 MT 5%

Source: author Source: Vysotsk 0.66 2017 Gazprombank, Gasum Algeria 11 MT 22% Figure 2 (right): Top-10 LNG producers in 2012; Russia 10.9 MT < 0,1% Figure 3 (top): Russia’s plans for LNG facilities development Oman 8.1 MT 1%

Source: IGU, 2013 IGU, Source: Brunei 6.8 MT < 0,1% winter constitutes on average only 40 long pursued a strategy of maintaining days) and promptly growing volumes. control over the entire supply chain – That same autumn Gazprom announced from production to end sales, which About the author a gas pipeline construction capable of according to Gazprom's Head of Foreign supplying 7 billion cubic metres of natural Economic Activities, Pavel Odervo, will Daria Gritsenko (PhD) specialises gas per year to the Port of Ust Luga, an remain the case with its LNG strategy. in the fields of Maritime Policy and important logistical connection between Governance, Quality Shipping, the remote gas fields and the future Conclusion Corporate Social Responsibility in liquefaction plant. Gazprom’s plans to promptly increase Shipping and Energy Transition. She In autumn 2014, a preliminary its supply capacity in the BSR have studied in St. Petersburg, Hamburg, investment decision was made that been challenged, however realistic Turku and Helsinki and holds a confirmed Ust Luga as a terminal location the timetables and availability of Doctoral Degree in Social Sciences. and expanded the planned capacity to 15 investment and technology. Yet, several She is a postdoctoral fellow at the MTpa. It was anticipated to be realised by considerations shall be brought to light: Aleksanteri Institute (University 2019 at an overall cost of around US$10 • Though LNG facilities planned of Helsinki) conducting research billion. However, in February 2015 the for the Baltic are rather modest on environmental dimensions of project was postponed until 2020, which is compared to other regions, they are Arctic energy development and most likely attributable to limited funding significant at the regional scale. The transportation. She is a partner at the and the absence of the required technology Baltic LNG plant is mainly meant Finnish Center of Excellence ‘Choices under the conditions of ongoing Western to serve the European markets, of Russian Modernization’. sanctions. providing an alternative to LNG from Norway or Qatar and covering About the organisation New projects the demand for LNG bunker in Besides the Baltic LNG plant in Ust Baltic and North Sea areas. Instead, The Aleksanteri Luga, Gazprom has planned two other Russian Arctic and Far East Institute at the facilities in the BSR in Kaliningrad facilities are meant to supply Asian University of and Vysotsk. Both are expected to be markets Helsinki (Finland) operational in 2017. The Kaliningrad • Russian LNG terminals shall be functions as a LNG import terminal is supposed to understood in terms of politics national centre of provide an alternative to onshore gas as much as in terms of economics. research, study and expertise transportation to the Russian enclave Even when commercial viability pertaining to Russia and Eastern Kaliningrad. A small-scale production may seem weak, projects may get Europe, particularly in the social facility in Vysotsk has been positioned subsidies as the Russian government sciences and humanities. The institute as a plant to supply LNG for maritime seeks to gain momentum in the promotes cooperation and interaction bunkering and regional industrial growing Asian and emerging between the academic world, public consumption. European local LNG markets administration, business life and civil • The port competition in the eastern society, both in Finland and abroad. The promise of LNG bunkering Baltic range has been tightening Interest in supplying bunker LNG has ever since commercial operations Enquiries been one of the reasons for renewed commenced in Ust Luga. Due to its motivation from Gazprom to the Baltic dynamic development and growing Daria Gritsenko projects. Gazprom expects the growth diversified facilities, Ust Luga is Aleksanteri Institute in the use of LNG for bunker fuel in considered as the main competitor PO box 42 (Unioninkatu 33) the Baltic and North Seas to be up to to ports in Estonia and Latvia. With 00014 University of Helsinki 8-10 billion m3 annually by 2030. For the development of LNG facilities, Finland Gazprom, building supply infrastructure it will gain a unique competitive is a crucial step to capturing the emerging advantage and may become Russia’s Email: [email protected] LNG bunkering market, as Gazprom has major transshipment hub

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