Private Producer Aims to Ship Baltic's First Russian LNG Before Gazprom

Russia expects to send LNG to Europe by the end of 2017 from its distant Arctic peninsula of Yamal but a plant on its Baltic coast could establish the country as a more immediate supplier of LNG in a region already dependent on piped Russian gas.

The company will build a floating LNG plant off the port of Gorskaya, not far from Saint Petersburg, which will be fed by a 12 km pipeline from Gazprom.

The LNG will then be shipped to seven Baltic ports outside Russia using three tankers already on order from Russia's United Shipbuilding Corporation.

LNG Gorskaya's CEO Kirill Lyats told Reuters the company had agreed to build floating bunkering stations and storage facilities at the Baltic ports that will be able to supply LNG-fueled vessels with mostly Russian LNG by 2020.

The company said it had the acquired the necessary gas export permits from Gazprom.

"The bunkering stations in Lubeck (Germany) and Montu (Estonia) will be built by summer next year ... contracts have been signed," Lyats said in an interview.

The project means LNG Gorskaya could deliver the Baltic's first large-scale, locally produced Russian LNG three years ahead of Gazprom's Baltic LNG project, a much delayed plan the state-owned gas giant now expects to be running by 2023.

LNG Gorskaya's initial annual LNG output will be 0.42 million tonnes, which could triple within three years. Yamal LNG's peak production is expected to be 16.5 million tonnes, with much of that going to Asian customers.

Russia already produces some LNG near the Baltic, at Pskov near Estonia. The 23,000 tonnes of LNG produced there each year are delivered by road to Estonian gas company Eesti Gaas.

Besides Lubeck and Montu, LNG Gorskaya has also signed memoranda of understanding (MoU) with the ports of Parnu in Estonia, Grenaa in Denmark, Piteo in Sweden, Kotka-Hamina in Finland and Liepaja in Latvia, to build bunkering stations scheduled to be ready by May 2019.

"In total, the budget for the Russian part including the pipeline, the floating plant and three vessels will be around 200 million euros," Lyats said.

For the European infrastructure, LNG Gorskaya Overseas OU, a legally independent Estonian firm with some common shareholders, will cover the cost of about 140 million euros.

That amount includes the LNG storage facilities the company will build and the seven refuelling vessels, which Poland's Remontowa shipyard will be commissioned to build.

Lyats said the company had also signed MoUs with shipping companies mainly from Sweden, Finland and Germany to buy its LNG though he declined to name individual clients.

While Lyats did not rule out supplying LNG directly to countries in the event of large-scale demand, he said the, "margin from bunker operations will be more efficient than direct selling".