Novatek, Russia’s largest independent natural gas producer and a key developer of liquefied natural gas (LNG) in the Arctic, is switching from European partners to a new company in the United Arab Emirates (UAE).
Industry reports say that Novatek hopes that a new Emirati company called Green Energy Solutions will help it get the technology its former western partners were supposed to give it.
As a result of western sanctions, several western companies, such as Technip from France, Saipem from Italy, and Baker Hughes from the US, left Novatek’s Arctic project. After Russia invaded Ukraine, economic sanctions were put in place. These have had a significant impact on how Novatek does business.
Even though it is still possible to bring Russian LNG into the EU, it is now illegal to finance or export key technology that could be used to build new LNG projects, even in the Arctic. So, Novatek is looking for new international partners outside the EU sanctions to get the essential western technology it needs to finish the Arctic LNG 2 project.
“Green Energy Solutions is based in the UAE, so it is not subject to EU sanctions and can buy and supply equipment for the projects,” said Alexander Kukuev, a partner at a Moscow law firm specializing in international business corporate law.
Despite Penalties, Arctic Projects Continue
Because of sanctions from the west, Novatek’s flagship Arctic LNG 2 project, which has three production lines, will be significantly delayed. The company says that the first production line won’t open until at least the end of 2023, which is a year later than planned. What will happen to the other two lines is still unknown.
Novatek has said in recent months that it is trying to change the liquefaction process where possible. It hired a Turkish floating power plant so that the few specialized turbines it had received before the sanctions could be used to turn gas into liquid instead of making electricity.
But experts in the field aren’t sure if these efforts will be enough to finish the second or third production line. Novatek’s method for turning natural gas into a liquid, called “Arctic Cascade,” has reportedly failed. This method relies mainly on technology from Russia.
In 2021, the company stopped trying to use it for its Ob LNG project and said it would instead get the compressors and other equipment it needed from the German company Linde. Novatek wants to get around the sanctions by working with the new Emirati company and getting much-needed technology in a low-key way.
Green Energy Solutions Project Management Services is a new Emirati company in Abu Dhabi in June. It calls itself an engineering, project management, and construction consulting firm. At the same time, Novatek started hiring people, including a chief accountant and project manager, for an unspecified operation based in the UAE.
It’s interesting that the company was set up in Abu Dhabi instead of Dubai. This means that it is backed by or sponsored by the local elite. At the very least, this was made possible by local elites, and Al Nahyan, the President of the UAE, may have given his approval, as this is a strategic asset that needs support, says Andreas King, a professor and researcher at London’s King’s College.
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Closer Ties
After participating in several joint ventures and investments, the United Arab Emirates and Russia’s Novatek have grown their relationship to a deeper level. Mubadala, the United Arab Emirates sovereign wealth fund, has allocated some of its assets to the Russian Direct Investment Fund (RDIF).
Mubadala also purchased a one-and-a-half percent share in Sibur, a Russian petrochemicals business, in December 2021. Sibur was already partially owned by Novatek’s CEO and Chairman of the Board. In addition, Novatek has made LNG deliveries from the Arctic to the UAE; the first of these supplies is scheduled to take place in August 2020.
“With our first cargo to the United Arab Emirates, we are expanding the territory of our LNG supply,” remarked Lev Feodosyev, the deputy chairman of Novatek’s management board. This statement was made about the company’s first shipment of LNG to the UAE.
Sheik Mohamed bin Zayed Al Nahyan, the President of the United Arab Emirates, flew to Moscow last week to meet with Vladimir Putin, the President of the Russian Federation. The visit takes place a little less than a week after the United Arab Emirates (UAE) sided with Russia in a decision made by OPEC+ to enact significant cuts in oil output, going against the intentions of the United States.
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