Competing in the global liquefied natural gas (LNG) race, Russia’s largest independent gas producer, Novatek, France’s Total and the other project shareholders have approved the final investment decision (FID) for Arctic LNG 2, a major LNG development located on Russia’s Gydan peninsula.

According to Total, the project will have a production capacity of 19.8 million tonnes per year and is expected to export its first cargo of the super chilled fuel by 2023, the second and third train to start up by 2024 and 2026.

“By virtue of size alone, it’s a pretty big deal and probably has some global significance, “Alexei Kokin, a senior oil and gas analyst at UralSib Financial Corp in Moscow, told New Europe by phone on 6 September. “We’re looking at almost 20 million tonnes when it’s completed. Not very soon – 2026 – but it is pretty large size. It’s going probably to be the largest LNG export facility,” he added.

During the Eastern Economic Forum in Vladivostok, Novatek announced that the participants of Arctic LNG 2 approved the FID for the Arctic LNG 2 project, consisting of the development of the Utrenneye field and the construction of a natural gas liquefaction plant on the Gydan Peninsula in the Russian Arctic region. The participation in this project also provides for the long-term LNG offtake by all the participants in proportion to their respective ownership interests, Novatek said in a press release.

Arctic LNG 2 owns an LNG export license. The Project participants include Novatek with 60%, France’s Total with 10%, China National Petroleum Corporation (CNPC) with 10%, China National Offshore Oil Corporation (CNOOC) with 10% and the Japan Arctic LNG, consortium of Mitsui & Co and JOGMEC with 10%. Total, which is the second-largest private global LNG player, also owns an 11.6% indirect participation in the project through its 19.4% stake in Novatek, thus an aggregated economic interest of 21.6% in the project.

“Novatek has emerged as one of the key players of the global LNG market with the successful launch of Yamal LNG,” Novatek Chairman Leonid Mikhelson said, who announced the FDI alongside Russian Energy Minister Alexander Novak in Vladivostok.

“Today, we have taken another step forward in our goal to become one of the largest LNG producers in the world by approving the final investment decision on our second large-scale LNG project – Arctic LNG 2,” he said. “Our long-term strategy is to develop our vast low-cost hydrocarbon resources on the Yamal and Gydan peninsulas, as well as to maximise our cost competitiveness across LNG markets,” Mikhelson added.

Novak said this is an important project for Russia and follows the country’s strategy to create capacities for LNG production.

Total CEO and Chairman Patrick Pouyanné said Arctic LNG 2 will leverage the success of the Yamal LNG project and will deliver competitive LNG to the markets in four years’ time. “Arctic LNG 2 adds to our growing portfolio of competitive LNG developments based on giant low cost resources primarily intended for the fast growing Asian markets,” he said.

Japanese Industry Minister Hiroshige Seko said the project is one of the largest in the history of Japanese-Russian relations. “It will unite Japan and Russia even more, as well as Europe and Asia. The Japanese government will provide all necessary assistance for the realization of this project,” Reuters quoted him as saying.

Kokin told New Europe that Russia is going to have a few more LNG projects in the coming decade but this is probably the most promising. “Novatek has a great track record, it has a proven reserve base, it has proven experience and good shareholder consortium, including Total, which has same experience as Novatek when it comes to Russia. So it’s positioned for success, at least at the implementation level. There’s a pretty good chance it will be done on time without these atrocious delays we have seen elsewhere,” Kokin said.

According to Total, Arctic LNG 2 production will be delivered to international markets by a fleet of ice-class LNG carriers that will be able to use the Northern Sea Route and the transshipment terminal in Kamchatka for cargoes destined for Asia and the transshipment terminal close to Murmansk for cargoes destined for Europe.

Definitely Russia as whole is going to be a much larger (LNG) player as a result of the Arctic LNG-2 project, Kokin said. “Novatek has enough resources for at least one more Arctic LNG project. It’s oddly called Arctic LNG-1 but it will be the next big one and about the same size as Arctic LNG-2 so if you add them then Novatek projects alone will probably be enough to make Russia a pretty big player in the market,” the Uralsib analyst said.

follow on twitter @energyinsider