In a move that many said would never happen, the biggest independent natural gas producer in Russia launched its much-hyped Yamal liquefied natural gas (LNG) project on December 8, 2017.
Vladimir Putin personally oversaw the 1st official loading of LNG at the Novatek facility on the Yamal Peninsula in the Siberian Arctic.
Believed to hold the largest natural gas reserves in the world, the Yamal could meet global demand for a decade.
The $27 billion project brings online some 5.5 million tonnes of LNG per year, which is predicted to expand to 17.5 tonnes over the next few years.
CNPC, which owns 20 % of the project, purchased the 1st cargo of LNG.
Other key stakeholders include France's Total (with 20 % ownership) and China's Silk Road Fund (9.9 %). Novatek retains a 50.1 % majority stake.
In addition, Novatek is currently negotiating with a string of partners to build additional LNG facilities on the Yamal Peninsula.
It has been a difficult project to bring to fruition. Novatek was hit with Western sanctions as a result of Moscow's involvement in Ukraine, requiring the company to seek foreign investment.
Furthermore, the Yamal energy reserves lie below frozen marshland in the Arctic part of Serbia, thousands of kilometers from any market.
Prior to the Yamal LNG initiative, Russia's only LNG capabilities were on Sakhalin Island in the Pacific Ocean - a mostly Western-led project supervised by Shell.
Despite their isolation, the Yamal fields provide the convenience of being able to ship LNG cargo west or east, making the fields a far more attractive option than Sakhalin.
Russia seeks to improve the flexibility of its energy exports, especially as tensions with the West persist.
As Russia expands its LNG capabilities, state-owned energy giants Rosneft and Gazprom are looking to further develop their own natural gas projects.
But they will have to play catch-up with the lesser-known Novatek.
In 2018, the company plans to move forward with preliminary talks for a Yamal expansion, negotiating with Japan, Saudi Arabia and France, among others.
In fact, Saudi Arabia's Energy Minister Khalid Al-Falih attended the launch of the Yamal LNG plant, accompanying Russian Energy Minister Alexander Novak.
Moreover, the Saudis are considering investing in a Yamal LNG expansion - a sign of broader cooperation between Riyadh and Moscow.
Yamal's launch marks a major milestone in Russian energy — the 1st natural gas exports not under full control of Gazprom.
Rival energy firms have long attempted to break Gazprom's hold on gas exports, but the Kremlin has a track record of politicizing energy.
In the past, Moscow prioritized Gazprom's exports in an attempt to shape foreign policy.
But in recent years, rival firms made a strong case to diversify exports in an attempt to drive competition and make Russian supplies more attractive.
The Kremlin relented in allowing Novatek's exports to travel by sea but has yet to break Gazprom's stranglehold over piped natural gas.
This will likely change in the coming years, particularly as rival Rosneft speeds up production and reinforces its ties with the East.
The era of Gazprom's monopoly is seemingly coming to an end.
Author: Stratfor
