Russia’s Gazprom scraps Ust-Luga EPC contract

Russian gas giant Gazprom said it has agreed with partners to terminate an EPC contract signed last year as part of its large LNG export and chemical project in the Baltic port of Ust-Luga.

“Gazprom, RusGazDobycha and Nipigaz have decided to terminate the business relationship under the EPC contract for the creation of a gas processing complex,” the state-owned firm said on Monday.

Gazprom said the “purpose of the decision is to optimize the project costs.”

To remind, Gazprom and RusGazDobycha agreed to build the gas processing and liquefaction complex worth more than 700 billion rubles ($9.59 billion) in March last year.

After that, RusKhimAlyans, the project operator of the complex established on a parity basis by Gazprom and RusGazDobycha, entered into the EPC contract with Sibur Group’s Nipigaz.

The contract, among others, included the construction of gas processing and off-site facilities at the complex.

Following the termination, Gazprom said it would appoint a new contractor for these works in the “near future.”

“The replacement of the contractor will not have any influence on the project implementation schedule,” Gazprom said.

All works for the creation of the complex that will process ethane-containing gas will go “as planned,” the firm said.

The complex includes an LNG plant with 13 million tonnes per year capacity but also ethane fraction and LPG production facilities.

Gazprom will supply feed gas to the integrated project from its Achimov and Valanginian deposits in West Siberia.

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