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22 Dec, 2018 05:41

Dangerous liaisons? Italians want to build LNG plant in Russian Arctic despite US sanctions threat

Dangerous liaisons? Italians want to build LNG plant in Russian Arctic despite US sanctions threat

Russia’s energy giant Novatek has signed a series of supply and construction contracts with international partners for its ambitious Arctic facility for liquefying natural gas, the company says.

Despite a constant threat of US sanctions, Italian company Nuovo Pignone, owned by American multinational conglomerate General Electric, sealed a $500-million deal for the supply of gas turbines for the new facility. Arctic LNG 2 is Novatek’s second plant for liquefying gas in the Arctic region. Another contract worth $2.2 billion for platform construction was signed with Italian energy contractor Saipem and Turkey’s Renaissance services company.

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Under the terms of the first deal, the GE subsidiary will deliver 20 LM9000 gas turbines with a capacity of up to 75 megawatts, built on the basis of Boeing 777 engines, reports Russian business daily Kommersant. According to the media, the company won the contract by outpacing bidders such as Siemens and Mitsubishi.

Though Novatek, Russia’s largest privately owned natural gas producer, has been subject to US financial sanctions since 2014, equipment supplies for LNG projects are not currently being targeted by the penalties. The company managed to bypass the measures by switching its financing to euros from dollars four years ago. Novatek also won $12 billion worth of Chinese funding to replace Western financing.

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If Washington hits Russia’s energy sector with a new wave of sanctions, under export control rules, Nuovo Pignone will still deal with the Italian government. Rome approved the contract signed between the Italian and Russian companies on December 17.

Novatek is planning to launch operations at Arctic LNG 2 at the end of 2022, which will produce 19.8 million tons of LNG per year when at full capacity. The project is estimated to cost around $22 billion.

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