Novatek has circulated an enquiry to shipowners for up to 10 LNG carriers to support its planned Arctic LNG 2 development — despite growing uncertainty on market demand that is slowing progress on other projects.
TradeWinds understands a formal request for proposals (RFP) has been sent out to a select group of owners that have previously worked with the Russian company on Arctic business.
But Novatek is understood to have floated the requirement as the ships it needs for its smaller Ob LNG project while at the same time making it clear the vessels were also needed for Arctic LNG 2.
Dual purpose
One observer commented that this could be to blur the company’s intention to see these vessels built outside Russia.
Arctic LNG 2 is Novatek’s second LNG project. The 19.8 million tonnes per annum development, which it plans to start up by 2023, is being built on the Gydan Peninsula to the east of its fully operational 16.5-mtpa Yamal LNG project.
The 4.8-mtpa Ob LNG, the company’s third LNG project, is to be constructed on the Yamal Peninsula. Novatek has said this could come online concurrently with, or even in advance of, Arctic LNG 2.
In the past few weeks, there have been delays to a number of under-development LNG projects as shareholders have signalled that demand cuts caused by the coronavirus pandemic could extend into the longer term.
Novatek is already engaged in a process to build at least 15 ice-breaking Arc7 LNG carriers for Arctic LNG 2.
It has been working with Sovcomflot (SCF Group) on the vessels, which it plans to build at Russia’s Zvezda Shipbuilding Complex.
Delay likely
To date, five of these have been ordered — the first by Sovcomflot and four by the Novatek-Sovcomflot joint venture Smart LNG.
The joint venture is in discussions with Zvezda on a further 10 newbuildings. These had been due to be firmed up this quarter, but a delay seems likely.
These would be the first LNG carriers built in Russia. The purpose-built domestic yard is working with Samsung Heavy Industries on the construction of these complex, high-specification vessels.
But Novatek also plans to add 10 conventional LNG carriers to support these 15 Arc7 ships. These are the subject of this latest enquiry to owners.
Shipbuilders SHI, DSME and Hyundai Heavy Industries from South Korea and China’s only large LNG carrier builder, Hudong-Zhonghua Shipbuilding (Group), submitted offers for these newbuildings last month.
This month’s RFP is Novatek’s first formal approach to shipowners.
Sources following the business said Novatek is likely to approach owners such as Sovcomflot, Dynagas, Teekay LNG and MOL and their Chinese partners, which it worked with previously on the 17 Arc7 LNG newbuildings for Yamal LNG.
Novatek announced last week that it had reached a milestone by producing 1trn cbm of natural gas.
“We have built a natural gas platform both domestically and now internationally with our Yamal LNG project that is one of the most cost-competitive in the industry,” said Leonid Mikhelson, chairman of the management board.
Company officials have previously said the gas resource base in the Russian Arctic offers the potential for 140 mtpa of production, if the market demanded it.
