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A compromise by pipes

11 October 2023

Kondratiev Sergey V. Principal Director on Economic Studies, Head of the Economic Department

Sergey Kondratiev, Principal Director on Economic Studies at the Institute for Energy and Finance, made comments for the Kommersant newspaper on the Murmansk LNG project implementation.

NOVATEK and Gazprom, through the mediation of the Russian, managed to agree on a scheme for the construction of a large gas pipeline to NOVATEK's promising Murmansk LNG project. According to the agreement, the main pipe with a length of 1.3 thousand km and a capacity of 40 billion cubic meters per year, taking into account the needs for gasification of Karelia and the Murmansk region, will be built by NOVATEK. As Kommersant found out, NOVATEK will then sell the gas pipeline to Gazprom in installments and at the same time will pay him a tariff for gas transportation.

The proposed scheme for the gas pipeline construction may become quite common in terms of Gazprom's limited financial resources, Sergey Kondratiev believes.

"Before that, such mechanisms were practiced in the electric grid sector: the construction of substations by an investor with subsequent commissioning or sale to territorial network organization. But this was not used in the construction of main gas pipelines in the unified gas supply system zone," he notes.

According to expert estimates, the construction cost will exceed 400 billion rubles. He recalls that in 2022, the authorities of the Murmansk Region estimated the project at 350 billion rubles, while a much smaller capacity was assumed.
Kondratiev Sergey V. Principal Director on Economic Studies, Head of the Economic Department
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