A Massive Natural Gas Plant Rises In The Arctic

With the help of its Russian partner, Novatek, and the China National Petroleum Corporation (CNPC), French energy giant Total has created an uprecedented liquid natural gas plant on the frozen Yamal Peninsula, some 370 miles north of the Arctic Circle.

Building Yamal LNG
Building Yamal LNG
Anne Feitz

SABETTA â€" Snow, wind, frigid temperatures surround an enormous factory with towering cranes, bundled-up men, and glacier-splitting ships. Here, visitors move around the area in buses designed to withstand snowstorms and drive on icy roads. It’s common to see small Arctic foxes trotting around the blue-and-orange buildings that house the 15,000 people who work here.

Welcome to Sabetta. It’s here in the Siberian Arctic, about 1,550 miles away from Moscow, that the energy company Total’s massive Russian project, Yamal LNG, is unfolding. With its partners Novatek and China National Petroleum Corporation (CNPC), the French oil giant operates a mega gas field and factory on these drylands. The factory refreezes the gas to temperatures of -256 °F (-160 °C) to transport it by boat and sell it anywhere in the world.

Total is busy securing its future success with this spectacular construction site. The confirmed reserves of this gas field on the banks of the Ob estuary in the Yamal Peninsula are immense. According to Total’s CEO, Patrick Pouyanné, the field is "a gigantic gas sponge." Within the next three or four years, this deposit will produce 642.8 million gallons and 16.5 million tons of liquefied natural gas each year. That is the equivalent of two-thirds of France’s annual consumption.

For the French oil company, which owns 20% of Yamal LNG and 18.9% of Novatek, that represents 90,000 barrels per day. This will provide a significant part of the growth of group’s production within the next three years. Michael Borrell, Total's Senior Vice President Continental Europe & Central Asia, confirms: "It is one of our most important projects because of its size and the amount of investment that is necessary."

With a budget of $27 billion, Yamal LNG is one of the largest investments in the entire oil industry. For Total and its partners, this project comes with numerous challenges: technological, financial, and economic.

Sergey Lashugin, who showed us around the site, boasted that the creation of Yamal LNG first had to overcome the site’s isolation and lack of a road leading to Sabetta. Until the airport opened in February 2015, helicopters were the only method of travel, but they were very dangerous because of the frequent snowstorms. Above all, it is pitch dark for almost two months out of the year, the temperature falls below -58 °F (-50 °C) in the winter, and the water is frozen six to nine months each year.

Jacques de Boisséson, general director of Total in Moscow, notes that this is the first project in the world to function under such climatic conditions. Gas in Sakhalin or Alaska gas was already extracted in comparable situations, but the respective liquefaction factories were situated in milder climates. Similarly, even though Norway's Snøhvit project was located in the Arctic region of the Barents Sea, the ocean never froze.

It was necessary to not only use materials capable of resisting the extreme air temperatures, but also to resolve the problem of facing the mostly frozen ground. During the summer months, the permafrost thaws a few feet deep. To ensure that the instillations would remain stable, 80,000 stilts were forced 65 feet down into the ground. Dimitri Monakov, the joint general director of Yamal LNG, says, "The stilts are heat stabilizers, and keep the soil temperature between 24.8 °F (-7 °C) and 19.4 °F (-4 °C), so the permafrost never thaws," he said.

And to avoid tens of thousands of personnel working in these inclement latitudes, while also managing the necessary infrastructure and logistics, the factory was constructed like a Lego brick. More than 160 "modules" were built in ten shipyards throughout China, Indonesia and the Philippines before being transported by boat to Sabetta for assembly.

Unprecedented scale

Glaciers have melted due to global warming, opening up the Northern trade route during the summer months. By arriving from the east via the Bering Strait, the ships can avoid the long journey of traveling through the Suez Canal to Asia. This prompted Total and its partners to order 15 icebreaking tankers to transport liquefied natural gas â€" another first. It was also necessary to construct a harbor by dredging the shallow Ob estuary and building jetties.

It is difficult to imagine today that in 2011, this area was virtually terra incognita. While the factory’s production in Yamal does not start until the third trimester of 2017, the French construction company Vinci is currently finished with the construction of the four gigantic tanks destined to store liquefied gas. At 262.5 feet long and 147.6 feet tall, these juggernauts are "the biggest in the world," confirms Sergey Lashugin.

As gigantic as they are, the logistical and technological challenges are not the only ones. There is also politics: The site was launched in late 2013, a few months before the sanctions against Russia began. That's a hiccup worth $27 billion.

"When the sanctions happened in July 2014, we had advanced well financially with standard contracts with American banks and American lawyers. But we had to start over again from scratch," recalls Jacques de Boisséson. The Washington sanctions, decided upon in the wake of the Ukrainian crisis, did not affect the project directly because gas was not included â€" although the French company’s Russian partner, Novatek, was targeted, as one of its main shareholders, Gennady Timchenko, was close to Vladimir Putin.

Putin heading a meeting on the Yamal LNG project in Sept. 2013 â€" Photo:

American individuals and companies could not participate in the project, and the finances could not be contracted in dollars. The leaders of Yamal LNG were facing a long, hard battle. They solicited Russian, Chinese, and European banks and began prolonged and complex negotiations.

A profitability question

The negotiations had ended, but the European banks still remained "extremely prudent" and decided not to offer support. The Russian Welfare Bank provided $2.4 billion and Russian banks Sberbank and Gazprombank contributed $4 billion. At the end of April, Yamal LNG announced that it had obtained $12 billion from the Chinese banks, Export-Import Bank of China and China Development Bank. The approximate balance of $12 billion was provided by Novatek, Total, and CNPC who were joined in late March by the Chinese Silk Road Fund.

Though the threat of lack of funding is finally over, one more worry still looms: Will the project be profitable? The question does not really concern demand. The liquefied natural gas world market faces an influx of various projects: 100% of future production has been pre-sold through 15 to 25-year contracts â€" mostly to Asian buyers. The real question concerns the sale price, as these contracts are fixed to the prices of oil and gas, which have fallen heavily since mid-2014. In fact, Yamal was the last major liquefied natural gas project launched in the world. Many others have been postponed indefinitely.

Michael Borrell, the Senior European Gas and LNG Analyst for Société Générale's Commodities division, says that if the project is not delayed, it will be profitable, "especially because Russia is paying for a part of the infrastructure."

Total gambled big time on this project, and its partnership with Novatek has consequently become essential to the company’s development in Russia. The French company has reduced or frozen its other assets in the country, and it is about to relinquish 20% of the Kharyaga field, a sign of its downsizing in Russia. The other projects envisioned by the company with Lukoil in Siberia for spring 2014 have stalled because of sanctions.

Thanks to Novatek, 20% of which is owned by Total, Russia became one of the leading countries exporting oil to France last year. France now imports 13% of all its oil from Russia, with other development projects in the works. Total’s big ambitions about its future in Russia, it seems, are just warming up.

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"The Truest Hypocrisy" - The Russia-NATO Clash Seen From Moscow

Russia has decided to cut off relations with the Western military alliance. But Moscow says it was NATO who really wanted the break based on its own internal rationale.

NATO chief Stoltenberg and Russian Foregin Minister Lavrov

Russian Foreign Ministry/TASS via ZUMA
Pavel Tarasenko and Sergei Strokan

MOSCOW — The Russian Foreign Ministry's announcement that the country's permanent representation to NATO would be shut down for an indefinite period is a major development. But from Moscow's viewpoint, there was little alternative.

These measures were taken in response to the decision of NATO on Oct. 6 to cut the number of personnel allowed in the Russian mission to the Western alliance by half. NATO Secretary-General Jens Stoltenberg said the removal of accreditations was from eight employees of the Russian mission to NATO who were identified as undeclared employees of Russian intelligence." We have seen an increase in Russian malicious activity for some time now," Stoltenberg said.

The Russian Foreign Ministry called NATO's expulsion of Russian personnel a "ridiculous stunt," and Stoltenberg's words "the truest hypocrisy."

In announcing the complete shutdown in diplomacy between Moscow and NATO, the Russian Foreign Ministry added: "The 'Russian threat' is being hyped in strengthen the alliance's internal unity and create the appearance of its 'relevance' in modern geopolitical conditions."

The number of Russian diplomatic missions in Brussels has been reduced twice unilaterally by NATO in 2015 and 2018 - after the alliance's decision of April 1, 2014 to suspend all practical civilian and military cooperation between Russia and NATO in the wake of Russia's annexation of Crimea. Diplomats' access to the alliance headquarters and communications with its international secretariat was restricted, military contacts have frozen.

Yet the new closure of all diplomatic contacts is a perilous new low. Kommersant sources said that the changes will affect the military liaison mission of the North Atlantic alliance in Moscow, aimed at promoting the expansion of the dialogue between Russia and NATO. However, in recent years there has been no de facto cooperation. And now, as Foreign Minister Sergey Lavrov has announced, the activities of the military liaison mission will be suspended. The accreditation of its personnel will be canceled on November 1.

NATO told RIA Novosti news service on Monday that it regretted Moscow's move. Meanwhile, among Western countries, Germany was the first to respond. "It would complicate the already difficult situation in which we are now and prolong the "ice age," German Foreign Minister Heiko Maas told reporters.

"Lavrov said on Monday, commenting on the present and future of relations between Moscow and the North Atlantic Alliance, "If this is the case, then we see no great need to continue pretending that any changes will be possible in the foreseeable future because NATO has already announced that such changes are impossible.

The suspension of activities of the Russian Permanent Mission to NATO, as well as the military liaison and information mission in Russia, means that Moscow and Brussels have decided to "draw a final line under the partnership relations of previous decades," explained Andrei Kortunov, director-general of the Russian Council on Foreign Affairs, "These relations began to form in the 1990s, opening channels for cooperation between the sides … but they have continued to steadily deteriorate over recent years."

Kortunov believes the current rupture was promoted by Brussels. "A new strategy for NATO is being prepared, which will be adopted at the next summit of the alliance, and the previous partnership with Russia does not fit into its concept anymore."

The existence and expansion of NATO after the end of the Cold War was the main reason for the destruction of the whole complex of relations between Russia and the West. Today, Russia is paying particular attention to marking red lines related to the further steps of Ukraine's integration into NATO. Vladimir Putin's spokesman Dmitry Peskov previously stated this, warning that in response to the alliance's activity in the Ukrainian direction, Moscow would take "active steps" to ensure its security.

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