The leading data and analytics company notes that Novatek’s new project is anticipated to generate 120 000 tons per annum (kpta) of hydrogen and 2 million tons per annum (mpta) of ammonia, in addition to Novatek growing its liquefication capacity to 59 mpta in the next 5 years, which will be used to capitalize on expected global demand growth for low-carbon fuels.
Anna Belova, Oil & Gas Analyst at GlobalData, comments:
- Novatek sells 90% of its natural gas on the domestic market, where prices are fraction of global gas spot prices – since only Gazprom can export pipeline gas outside of Russia
- To access global markets, Novatek already has a number of new post-FID LNG projects, but the company is also pivoting to newer market opportunities
This new ammonia-hydrogen complex will utilize the same natural gas resource base as the original LNG project, but will see upward of 90% of carbon sequestered in long-term geological storage
Belova continues:
- Novatek’s LNG strategy was successful because it bet big on global demand growth, investing in every aspect of the LNG value chain
- By entering the blue ammonia and hydrogen markets early, the company can replicate this strategy and secure the entire blue ammonia and hydrogen value chain – from production and processing to transportation, trans-shipment and marketing
- The company has become a leader in LNG among Russian companies, now it wants to become the country’s leader in low-carbon fuels and carbon sequestration
In Q3 2021, the company’s normalized profit has almost doubled and free cashflow increased by 386% over Q3 2020, even as production decreased slightly.
Belova adds:
- Novatek’s year-on-year cashflow increase was a direct result of the company’s decade-long strategy to access international gas markets by growing LNG liquefaction capacity and circumventing Gazrom’s gas pipeline monopoly
- In 5 years, Novatek went from a ‘zero’ to a major player in global LNG markets
- Its growth in liquefaction capacity is now greatly outpacing global trends
