France's Total sees robust demand for LNG from Russia's Yamal

SABETTA, Russia (Reuters) - French oil and gas group Total believes there is enough demand on the spot market for liquefied natural gas from its Yamal LNG plant in Russia, Total’s chief executive said on Tuesday, as the project has expanded ahead of schedule.

FILE PHOTO: The logo of French oil giant Total is pictured at a petrol station in Latresne near Bordeaux, France, November 19, 2018. REUTERS/Regis Duvignau/File Photo

On Tuesday, Russian Prime Minister Dmitry Medvedev attended a ceremony marking the launch of the third train, or stage, of Yamal LNG, which expanded its annual capacity to 16.5 million tonnes.

The expansion had been initially expected at the end of 2019 and a quicker rise in output has raised questions about Yamal LNG’s ability to sell the additional volumes. It has pre-sold more than 96 percent of its LNG production under long-term contracts for the next 20 years.

Russian gas producer Novatek controls Yamal LNG, which is co-invested by Total, China’s CNPC and the Silk Road Fund. It started operations in December 2017.

Total’s Chief Executive Patrick Pouyanne said Yamal LNG would start sales under a long-term contract from the third stage of the Yamal LNG project as initially planned.

“It is not difficult to sell on the spot market, the LNG market is growing by 10 pct per year or more, so clients are asking for more LNG, it’s not a real issue,” Pouyanne told reporters.

“We export more LNG quicker, its good for the project. In fact, it is a surprise, but the (LNG) trains are ready in front of all the vessels,” he said.

Last month, an LNG tanker transferred a cargo of Yamal LNG to another vessel off the tip of northern Norway, the first such operation that will help the facility raise production.

This has irked the United States, who has said the operations undercut Europe’s energy diversification efforts.

By transferring LNG to more conventional tankers in Norway, the Arctic vessels cut in half the distance they would cover to deliver gas to Europe, enabling more frequent shipments from the Novatek terminal and increasing Russia’s gas exports.

Russia’s foreign ministry, in emailed comments to Reuters, said the operation’s aim is to reduce transportation costs, calling criticism from the United States “unfair” and “political pressure”.

Reporting by Katya Golubkova; Writing by Tom Balmforth and Vladimir Soldatkin; Editing by Louise Heavens