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Budget crash at Sabetta puts Murmansk in squeeze

The Sabetta port will be more than 40 percent more expensive than planned.

The Russian Ministry of Transport suggests to move budget money from the projected Murmansk Transport Hub to the grand port development project in Sabetta, the Yamal Peninsula.

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The conflict between Russia’s two biggest port development projects in the Arctic unfolds as the Sabetta port is getting far more expensive than planned. New estimates from the Ministry of Transport indiate that the port will cost 69,7 billion roubles, or more than 40 percent above the original budget.

The Sabetta port is to serve the Yamal LNG, the major project in the Yamal Peninsula operated by Novatek together with the international companies Total and CNPC. While the development costs for the plant and the nearby South Tambey gas field are covered by the three companies, the costs for port development is covered primarily by the Russian state.

Now, Transport Minister Maksim Sokolov is looking for additional federal funding in an increasingly money-stripped state coffer. And his eyes have caught interest in the country’s second major port developent project, the Murmansk Transport Hub.

According to newspaper Vedomosti, Sokolov proposes to cut the Murmansk project with 4,9 billion roubles. Also several other federal infrastucture project are on the proposed cut-list.

As previously reported, the Russian state is to invest a total of 56,5 billion roubles in the Murmansk project, which includes a new 28 km long railway line and port facilities on the western shore of the Kola Bay. The project was earlier this year also put in a squeeze by other federal officials who wanted to transfer money from Murmansk to alternative infrastructure projects in the Crimea, however that proposed cut was ultimately stopped by Governor Marina Kovtun.

According to Sokolov, ”the international reputation of Russia as supplier of LNG is at stake if the Yamal LNG project is delayed”. The project consortium will reportedly have to pay $400 million of fines per month for delays, Vedomosti writes. As previously reported, major gas delivery contracts have been signed in the project, with Chinese, European as well as Russian buyers. The LNG plant and port development is due to be ready in 2017.