March 6, 2023 [Energy Intelligence] – Russia’s Gazprom plans to build a $3 billion medium-sized LNG plant in East Siberia to spur consumption of natural gas in the region.
The gas giant’s Gazprom Nedra exploration subsidiary on Thursday signed a cooperation agreement with the Krasnoyarsk region administration to develop several upstream blocks and build an LNG plant.
The plant is expected to produce 2 million tons per year of LNG, business daily Vedomosti reported, citing a Gazprom presentation from an economic forum held in Krasnoyarsk on Thursday.
The EU’s technology sanctions imposed against Russia last year in response to the invasion of Ukraine complicate Russia’s long-term plans to expand large-scale LNG production, but medium-sized projects look safe, as Russia has domestic technology for smaller liquefaction trains.
LNG Turns to Domestic Market
With that capacity, the proposed plant will be Russia’s largest LNG plant focused on domestic sales. Russian LNG is now almost entirely exported, while only mini plants sell part of their product at home, as well as Gazprom’s recently launched 1.5 million ton/yr Portovaya LNG facility in northwestern Russia, which also supplies small volumes to domestic consumers.
Economics of LNG supplies to domestic customers has traditionally been considered doubtful due to rather low regulated gas prices on the domestic market and a higher cost of LNG than that of other fuels. But Russia now seeks to develop more LNG projects as part of its nationwide program to expand the gas grid and increase natural gas penetration.
Gazprom, which is assigned to develop the program, is now more than ever interested in higher domestic consumption. The company’s pipeline gas exports to Europe have dropped significantly since the start of Russia’s war in Ukraine one year ago, and its export diversification to the East will take years and large investments.
Power of Siberia 2 Neighbor
The proposed LNG plant will be located near the village of Taezhnyi, some 500 kilometers northeast of the city of Krasnoyarsk and the potential route of Gazprom’s planned Power of Siberia 2 gas export pipeline to China (see map).
Gazprom has yet to agree on a 50 billion cubic meter per year gas supply contract with China to proceed with Power of Siberia 2 construction. But if the pipeline is built, it will run just 50 km away from Krasnoyarsk and give access to pipeline gas for two thirds of the region’s population, the region’s Governor Alexander Uss told the Krasnoyarsk forum.
The LNG plant will be fed from the Abakansky, Ibinsky and Ilbokichsky upstream blocks of Gazprom, harboring a combined 130 Bcm of natural gas. Gazprom plans to reach the production plateau of 3.9 Bcm/yr at the three fields in 2025, according to the presentation cited by Vedomosti.
Instead of building a pipeline connecting the fields to Power of Siberia 2, Gazprom will liquefy the gas and supply LNG to off-grid consumers in the region, including 15 industrial consumers, one heat and power plant and 22 heating plants. LNG will be delivered by trucks, railroad and river tankers.
Gazprom plans to invest 222 billion rubles ($2.9 billion), including 98.7 billion rubles in the LNG facility construction, 82.9 billion rubles in upstream development and 40.4 billion rubles in transportation infrastructure.
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