Gazprom, Shell Agree on LNG Plant Expansion

Published Dec 23, 2013 11:22 AM by The Maritime Executive

Russia's top natural gas producer Gazprom approved on Monday an expansion of the Sakhalin-2 liquefied natural gas (LNG) plant it co-runs with Royal Dutch Shell, bending to pressure from its Anglo-Dutch partner.

Gazprom long opposed the idea of constructing a third line, or train, at the plant on the northwest Pacific island of Sakhalin, the only operational LNG plant in Russia, which produces 10 million tons of the frozen gas a year.

Gazprom cited different reasons for refusing to expand the plant, including a lack of gas resources, but Shell warned the Kremlin-controlled company of the risks of missing out on a peak in gas prices.

Gazprom said CEO Alexei Miller and Shell's CEO Peter Voser had met in Moscow last Friday and had agreed to recommend that Sakhalin Energy operational company's board discuss the design of the third line.

Japan's Mitsui and Mitsubishi are also shareholders in the project

Sakhalin-2 was one of the world's largest LNG projects when launched in 2009, but has dropped down the pecking order as millions of tonnes of new capacity came on stream globally, especially in Qatar, Africa and Australia. The United States is also mulling LNG exports.

Russian President Vladimir Putin has urged local companies to develop production of seaborne LNG with the goal of doubling Russia's global market share to around 10 percent by 2020.

Earlier this month he scrapped Gazprom's monopoly on LNG exports.

Gazprom said it had agreed with Shell to sign a detailed roadmap in February for implementing the expansion project.

Gazprom also plans to set up an LNG plant in the Pacific port of Vladivostok with a view to producing up to 15 million tons of LNG after 2018.