German Linde has stopped deliveries for the largest chemical complex in Ust-Luga
The German company Linde GmbH withdrew from a joint venture with Rushimalyans (50% each from Gazprom and Rusgazdobycha Artem Obolensky) for the production of helical cryogenic heat exchangers for the gas processing industry and gas liquefaction. According to the Unified State Register of Legal Entities, as of June 21, Rushimalyans is a 100% owner of Northern Technologies LLC. Linde previously had a 50% stake in the company.
Earlier, Kommersant reported on the possible withdrawal of the Germans from the JV, citing sources familiar with the situation.
Rushimalyans is setting up an ethane-containing gas processing complex (KPEG) in Ust-Luga (Leningrad Oblast). The project is building one of the world’s largest gas processing plants (GPPs) with a capacity of 45 billion cubic meters. m per year, as well as a plant for the production of liquefied gas (LNG) with a capacity of 13 million tons (“Baltic LNG”). The launch of production lines at these plants is planned for 2024-2025.
Linde is one of the world’s leading companies in the field of oil and gas engineering, in 2021 its turnover reached $ 31 billion, net profit – $ 4 billion.
A KPEG representative confirmed to Vedomosti that Rushimalyans had “completed the acquisition of a 100% stake in the joint venture.” “Technological competencies have been consolidated on its basis and the necessary equipment will continue to be manufactured. “Changes in the composition of the participants of LLC” Northern Technologies “will not affect the implementation of the project for the construction of KPEG in the Ust-Luga region,” – said the interlocutor.
The JV for the production of helical cryogenic heat exchangers was established in 2017. Initially, the Russian partner was Power Machines, which later lost its stake to Severstal. In April 2021, Severstal’s share of 50% passed to Rushimalians. At full capacity to produce five or six heat exchangers a year, Nordic Technologies reached 2020.
Against the background of the beginning of Russia’s special military operation (SVO) in Ukraine and anti-Russian sanctions on March 21, 2022, Linde announced the suspension of new projects in Russia. “Linde is working with relevant governments and authorities to ensure the company’s full compliance with international sanctions and the safe completion of the affected projects in Russia,” the German company said at the time (quoted by Interfax).
Linde also left the Sibur project to build the Amur GHC (AGHC) with a design capacity of 2.7 million tons of polymers per year. The plant should use hydrocarbons left over from the purification of natural gas flowing to China through the Power of Siberia gas pipeline. “Linde has completed its work as part of the AGHC project. We are working on its adaptation to new conditions together with partners from [китайской] Sinopec, ”a Sibur spokesman told Vedomosti.
Linde’s actions are not the first time foreign companies have left Russian LNG projects. Earlier, the American Baker Hughes, according to the newspaper “Kommersant”, citing sources, recalled its engineers for the maintenance of basic technological equipment (gas turbines and compressors) from the Yamal LNG projects “Novatek” and “Sakhalin-2” “Gazprom”.
Baker Hughes has also left Novatek’s Arctic LNG-2 project. At SPIEF-2022, Leonid Michelson, co-owner and chairman of Novatek’s board, assured that the company maintains plans to launch the first line of Arctic LNG-2 in 2023. The second line was planned to open in 2024 and the third in 2025. Michelson also clarified that the localization of equipment at the plant is about 50%, and the company has already begun pre-project work on the construction of an LNG plant using Russian technology.
Linde is one of the few companies in the world engaged in the production of equipment for large-scale LNG production, and a number of positions it supplies can not be replaced in the current environment, said stock market expert “BCS World of Investment” Igor Galaktionov. The expert believes that the terms of the Baltic LNG project could be “seriously postponed.”
According to Alexander Frolov, deputy director general of the Institute of National Energy, Linde’s departure could delay the launch of the Ust-Luga complex by two to three years. He added that the withdrawal of a German competitor from our market will force Russian companies to master domestic technologies for large-capacity LNG. According to Frolov, Russian manufacturers, even with potential, could not objectively compete with Linde, which has established itself in the market. “Now they will have the opportunity to prove themselves,” – said the analyst.
Alexei Grivach, Deputy Director General of the National Energy Security Fund, like Galaktionov, emphasizes that Russia does not have a ready-made solution to replace European and American suppliers of LNG equipment. “There are three options: postpone the project until better times, reformat it to produce products that are not critically dependent on Western technologies and materials, or create your own competencies in this area. The latter path is the most difficult, but at the same time the most promising. But due to the scale and complexity, it will require the mobilization and consolidation of the efforts of the state, major market players, industrial enterprises and scientific organizations, “the expert concluded.