LNG is prevalently sold under long-term contracts

4 april 2019 | Ekonomika Segodnya

Alexander Kurdin, an analyst at the Analytical Center, commented on the first long-term contract for the supply of liquefied gas under the Arctic LNG-2 project to Ekonomika Segodnya agency. The Russian company Novatek intends to maximally load its transshipment terminals in the Murmansk region and in Kamchatka. This decision is believed to create conditions for year-round use of the Northern Sea Route.

Alexander Kurdin
Alexander Kurdin
Department for Fuel and Energy Sector

“Since gas production projects, especially if they are associated with the construction of LNG terminals (in the most difficult Arctic conditions), are very expensive and capital-intensive, few are willing to invest in them before concluding solid contracts. Therefore, the sale of most gas under long-term contracts in advance is a quite normal and widespread practice in the industry," said Mr. Kurdin.

Gas is sold at the earliest stages, i.e. before the start of the project itself and before decisive investments are made. Most likely, the new contract provides for certain precautionary measures if suddenly something goes wrong, but in general, when implementing LNG projects, companies are thus trying to obtain the support of customers," explained the expert.

The Arctic LNG 2 project provides for three construction phases for the production of liquefied natural gas with a capacity of 6.6 million tons per year each. The project is implemented using the resource base of the Utrennee gas field.

Source: Ekonomika Segodnya

Photo from open sources