Price processing plant // The contract for the creation of a gas processing plant in Ust-Luga is getting cheaper and cheaper

According to Kommersant’s information, the price of an EPC contract for the construction of a gas processing plant of Gazprom and Rusgazvydobuvannya in Ust-Luga is about € 5 billion. This is half the cost of a comparable Amur GPP in terms of capacity. Kommersant’s interlocutors in the industry believe that we are talking about a contract with an open price – after all, the main equipment has not yet been ordered for the GPP and the design has not even been fully completed. However, Rusgazdobycha, which does not comment on the price of the contract, argues that it can be adjusted “only downward”.

The cost of an EPC contract for the construction of a gas processing plant in Ust-Luga, which Linde Engineering and Renaissance Holding will build for Ruskhimalliance, is about € 5 billion, Kommersant sources familiar with the details of the project say. This is a contract for the gas processing part of the project, excluding the LNG plant.

The complex must annually process 45 billion cubic meters of gas with a high ethane content.

After the ethane fraction (3.8 million tonnes) and liquefied petroleum gases (2.4 million tonnes) are separated, most of the gas will be directed to liquefaction lines with a total capacity of 13 million tonnes per year, the rest of the gas to export gas pipelines of the Nord Stream system. Previously, Gazprom estimated the cost of the project at over 700 billion rubles. ($ 9.7 billion). The launch date of the first line is 2024, the second – 2025.

The project is being implemented by Ruskhimalliance, a parity joint venture between Gazprom and Rusgazdobycha of Artem Obolensky. The signing of an EPC contract with Linde Engineering and Renaissance Holding was announced at the SPIEF on June 4. According to the parties, the contract includes design work, equipment supply, construction and commissioning of gas processing facilities and technological off-site facilities.

In March, Ruskhimalliance terminated its partnership with the former EPC contractor, SIBUR’s NIPIGAZ, explaining this by its intention to cut costs.

NIPIGAZ, in turn, argued that the customer could not decide on the sources of financing and the degree of equipment localization.

NIPIGAZ was rendered bearish Ust-Luga

Rusgazvydobuvannya did not comment on the cost of the contract, saying that in the current configuration the terms of the project implementation remain the same, the price can only be adjusted downward. They also added that the price of the EPC contract with Linde is significantly lower than that offered by NIPIGAZ. Linde Engineering and Renaissance Holding did not respond to Kommersant.

The key question is whether the contract price is final or “open”, in the latter case it can be changed following the results of tenders for the purchase of equipment, as well as in other cases, for example, when the project is changed. The point is that Ruskhimalliance has not yet contracted for the main equipment, which accounts for most of the project cost.

Vitaly Markelov, Deputy CEO of Gazprom, noted on May 27 that both the contracting stage and the design stage of the gas processing plant in Ust-Luga have not yet been completed.

“Therefore, today it is too early to say the cost of building this plant, and even in dollar terms. Let us wait until we receive the project documentation in full, when there will be contracts, ”he said.

One of Kommersant’s interlocutors in this regard says that the price of the EPC contract for € 5 billion is open. However, a Kommersant source close to Ruskhimalliance claims that the price of the EPC contract is fixed and includes the supply of equipment. In this case, the cost of the gas processing part turns out to be very low – for example, the Amur GPP of Gazprom, comparable in capacity, cost € 11.4 billion. Kommersant’s interlocutors in the industry estimated the cost of the gas processing part at $ 11 billion and at about the same amount – the cost of building liquefaction lines.

Alexander Sobko from Rupec notes that in comparison with the Baltic GPP with the Amur GPP, the volume of investments is approximately two times lower with comparable volumes of gas processing (45 billion and 42 billion cubic meters, respectively). Such a significant difference can be explained by significantly greater logistical difficulties in the case of the construction of the Amur GPP. In addition, the expert recalls, helium extraction is also planned at the Amur GPP, which causes additional costs.

Tatiana Dyatel, Olga Mordyushenko