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    Shell Awaits Clarification on Gazprom's Baltic LNG Plans


Gazprom's unexpected announcement leaves another project under question.

by: William Powell

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Shell Awaits Clarification on Gazprom's Baltic LNG Plans

Gazprom's April 1 decision to proceed with a giant gas processing and liquefaction plant on the Baltic coast in northwest Russia appears to have caught its prospective partners in a mooted smaller project unprepared.

It had been working with Shell on the design concept for the 10mn mt/yr Baltic LNG, and the Anglo-Dutch major told NGW April 2 that it was now "reviewing the possible implications of Gazprom's decision." If built, both plants would be near Ust-Luga port.

In a statement, Shell said: "We have been discussing with Gazprom various concepts of the Baltic LNG development for a few years, including the case for the separate development of the LNG and gas processing plant (GPP) as our preferred option. Last week Gazprom, being the project owner, announced selection of the concept providing full integration between LNG and GPP as the final one instead."

Gazprom said April 1 the plant would be the biggest of its kind, processing up to 45bn m3/yr of ethane-rich gas for a mix of pipeline injection (about 20bn m3/yr), liquefaction (13mn mt/yr), ethane (up to 4mn mt/yr) and over LPG (2.2mn mt/yr). No foreign partners were mentioned.

Gazprom CEO Alexei Miller said: "Today we have launched the implementation of an ambitious project that is simply unparalleled in Russia. Within a short time, we are going to build the most powerful gas treatment and liquefaction plant in the country." At time of press it had not commented on what the decision meant for foreign partners such as Itochu and Shell, who were in discussions about Baltic LNG, a 10mn mt/yr project also at Ust-Luga, which would cater for bunkering and other transport demand for LNG.

Gazprom did not use the phrase "final investment decision" in this press release but that might not in itself be a significant omission. Years ago it announced the investment rationale, which was taken to mean FID, to build the 15mn mt/yr Vladivostok LNG in Russia's far east, which has still not been built.

Shell has been co-operating with Gazprom on gas production and transport for some time: the two are partners in the successful Sakhalin LNG project, which regularly exceeds nameplate capacity, and more recently Shell has also financed a tenth of the costs of the Nord Stream 2 project.