Putin launches $27-bn CNG project in Arctic, aims to surpass Qatar

President Vladimir Putin on Friday launched a $27-billion liquefied natural gas plant in the Siberian Arctic as Russia hopes to surpass Qatar to become the world's biggest exporter of the chilled fuel.

"This is a large-scale project for Russia," Putin said at the official ceremony in the port of Sabetta on the Yamal peninsula beyond the Arctic Circle. The centrepiece of the event was the loading of the first gas shipment onto an ice-breaking tanker from the Yamal LNG plant, with temperatures of minus 28 degrees Celsius outside.

"Without a doubt Russia not only can but will become the largest producer of liquefied natural gas in the world," Putin had said in March. "We have everything for it."

Qatar is currently the world's biggest exporter of liquefied natural gas.

For the project, Russia's privately owned gas producer Novatek partnered with France's Total and China's CNPC. The tanker that will carry the first shipment was named after Christophe de Margerie, the former Total chief executive who died in an accident on the runway of a Moscow airport in 2014.

White whiskers have been painted on the tanker in honour of the late CEO, who was known for his white bushy moustache. "I congratulate you all on the first loading of the cargo tanker which is named after our friend Christophe de Margerie," Putin said, praising him as "one of the trailblazers for this project".

"At the start of the project, people told me not to pursue this. Those who started this project took a risk but achieved a result," Putin added, thanking the project's international participants.

"Without their participation, without them trusting their Russian friends this project would not have got off the ground in terms of both the financing and the technology."

The project is set to start with a production capacity of 5.5 million tonnes per year and increase this to 16.5 million tonnes by the start of 2019.

Russia, the world's biggest gas exporter, derives a huge share of income from pipeline deliveries to Europe. With Yamal LNG, the country intends to strengthen its market presence in Asia and demonstrate its capacity to exploit huge Arctic reserves despite major technological challenges.

"Together we managed to build from scratch a world-class LNG project in extreme conditions to exploit the vast gas resources of the Yamal peninsula," Patrick Pouyanne, Total chairman and chief executive, said in a statement.

The project is operated by Yamal LNG company, owned by Novatek (50 per cent), Total (20 per cent), CNPC (20 per cent) and Silk Road Fund (9.9 per cent).

The project has had its share of financial and technical hurdles over the years.

While the Yamal peninsula has huge hydrocarbon reserves, it is an isolated region above the Arctic Circle, about 2,500 km from Moscow and covered by ice for most of the year, with temperatures dipping as low as minus 50 degrees Celsius.

Since its inception in late 2013, an airport and a port have had to be constructed, as well as gas reservoirs and the LNG plant itself.

Securing financing for the project was tricky. US sanctions against Novatek made it virtually impossible to borrow from Western banks, and Chinese partners eventually stepped in to resolve the issue.