Defiant Putin launches £20bn liquefied natural gas plant in the Arctic

Defiant Putin launches £20bn liquefied natural gas plant in the Arctic

The project will officially be run by the Yamal LNG company, with 50.1 percent owned by Novatek, 20 percent by Total, 20 percent by CNPC, and 9.9 percent by the Silk Road Fund, a Chinese state-owned investment fund.

Russian President Vladimir Putin said on Friday Russia was ready to sell gas to Saudi Arabia after he flagged off the first loading of liquefied natural gas at the Novatek-led Yamal LNG project in the Arctic.

The ceremony was attended by Saudi Arabia's Energy Minister Khalid al-Falih.

He added that the first train of the second Novatek plan, Arctic LNG, is to be launched in 2023.

"We said earlier that 96% (of LNG volume gas produced at the plant) has been contracted".

Russia's Novatek has provisionally set Dec 8 as the official launch date for the plant, Reuters has reported.

"That is why I am here", the minister responded to the Russian leader's proposal and congratulated him on launching the Yamal LNG plant.

However, Yamal LNG still faces risks according to some analysts.

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The tanker carrying the first LNG cargo is named after Christophe de Margerie, a former Total CEO who died in an accident on a runway of a Moscow airport in 2014.

Other phases are due to onstream in 2018 and 2019, and the project will eventually have four processing units with total capacity of 17.5 million tonnes a year.

Samuel Lussac, oil and gas specialist at Wood Mackenzie consultancy, said: "Despite challenging operating conditions, Yamal LNG was delivered on time and on budget".

While the Yamal peninsula has considerable hydrocarbon reserves, it is an isolated region in the Arctic circle, about 2 500km from Moscow and covered by ice for most of the year, where temperatures dip as low as -50°C.

The plant launch comes despite difficulties securing financing with U.S. sanctions on Novatek making it extremely hard to borrow from Western banks, leading to Chinese partners stepping in. Qatar is the biggest LNG exporter, with a 30% market share.

Mr Lussac said the coming months would show "whether the plant can operate smoothly in the harsh Arctic environment".

Transportation through the Northern Sea Route also remains undeveloped and "its feasibility as a major LNG delivery route is unclear", he said.

Russian Federation hopes the route will become an easier path to coveted Asian markets.

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