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Total to acquire stake in Yamal LNG

LNG Industry,

In spite of fears about European energy security, Total is looking to invest further in Russia’s inhospitable Arctic mineral fields. Total’s Chief Executive Christopher De Margerie, has said the company is looking to buy a 20 – 25% stake in the plan to develop a large gas field on the Yamal peninsula (owned by Novatek) and build a liquefaction plant. Total already own a stake in another project in the Russian Arctic, the Shtokman field.

At the start of the meeting, Total’s President took the opportunity to tell Prime Minister Putin that it did not want any more delays on the Shtokman project, “We will possibly need your help [...] to put pressure on all the project's partners,” he said. His comments come after it was announced in February that the Shtokman project would be delayed a further three years.

The license for the Yuzhno-Tambeiskoye field is held by Yamal LNG, in which Novatek holds a 51% stake. The field is estimated to hold some 1.2 trillion m3 of natural gas, or enough to supply Europe at the current rate for eight years. Qatar Petroleum has also signaled that it may join the venture and during the meeting, Total’s Chief Executive passed a message from Qatar’s government signaling its interest in the project.

However, like the Shtokman project, it is highly unlikely that this plan will get off the ground any time soon. The key problem being the prevalence of unconventional shale gas in the USA. The Shtokman project was originally intended to supply North America with LNG, but the discovery of shale gas deposits and the invention of new ways to exploit them has put plans back. Shale gas is likely to have the same impact on this new project as well.

Aside from the demand-related problems, building a liquefaction plant in the Arctic circle poses some very difficult technical problems as well. Energy industry consultants Wood Mackenzie believe the cost of the project would soar. “We would expect it to be a challenging and expensive development given its physical location and the nature of the environment in the Yamal Peninsula.” said Frank Harris, head of global LNG consulting at the firm.

There is a chance that Yamal LNG could go down the pipeline route instead and send its natural gas to Europe. If the American demand is not there LNG on the Yamal peninsula may be economically unviable.

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