Money down the drain: how the head of Novatek Mikhelson spends state funding on illiquid projects

Leonid Mikhelson’s Novatek company spends the state budget on empty projects and asks for funds to implement its own business.

According to the correspondent The Moscow Post in the Yamalo-Nenets Autonomous Okrugcompany Novatek announced a decision to build the Ob LNG gas pipeline in Sabetta according to the technology used to build the Arctic LNG-2 before. It is also known that the company abandoned the previously announced decision to use the Russian technology “Arctic cascade” of its own production. It should be noted that it was already used in the construction of the fourth line of the Yamal LNG pipeline, while the launch of the line was postponed four times, and interruptions are still observed on it, said “Kommersant”.

A little earlier, Novatek, represented by the company’s CEO Leonid Mikhelson, refused to further implement contracts with equipment suppliers for the Ob LNG, as he wrote. RBC. This gave rise to rumors that the company was curtailing the project.

In addition, Mikhelson put on suppliers the burden of responsibility for interruptions in the construction of Yamal LNG (by the way, Rosatom structures are among the major suppliers). What exactly the problem lies in fact is not completely clear, since personnel changes took place in the structure of Novatek itself – in December last year, the deputy chairman of the board of the company Evgeny Kot, who had worked in the company for almost two decades and supervised this project, was dismissed, wrote RBC. His departure was predicted by the media at the beginning of the year, the reason was precisely the problems with Yamal LNG.

Failed Technology

The “Arctic cascade” technology was previously the pride of Novatek, since it is entirely the fruit of Russian production and allows minimizing the damage from Western sanctions, it was presented as advanced and breakthrough, allowing to save resources with a similar efficiency. However, recent events make one seriously suspect that the technology has not actually been finalized, so it is hardly worth expecting brilliant performance from it.

The problem may be largely due to the fact that parts for LNG were produced by different Russian companies, so when combined, they simply may not correspond to each other. The manufacturer of the heat exchanger is JSC Cryogenmash, and the manufacturer of ethane evaporators is PJSC ZiO-Podolsk. As a result, calculations of heat and mass transfer processes were also carried out by different organizations – each for its own equipment. As a result, the output turned out to be a “hodgepodge” that does not add up into a coherent single system.

At the same time, a lot of public money was spent on the creation of technology, because under the pretext of import substitution, now you can get good funding. And if something did not go according to plan, you can report back and ask for additional funds under the pretext that “now we already know exactly what and how to fix it.”

Meanwhile, it is already known that several billion rubles of state funds have already been spent on the project (according to “Kommersant”130 million euros was spent on compressor equipment alone), and judging by the scale of the problems, fixing them will be no less expensive and costly.

Photo: Andrey Rudakov / Bloomberg

Humility at a disadvantage

As recently as February 17 of this year, Leonid Mikhelson announced that he would be implementing another project – namely, the supply of gas to Kamchatka in exchange for expanding the resource base in Yamal. This proposal was perceived by some as a kind of ultimatum from a businessman, which should be understood as follows: “You give us gas fields, we will supply you with gas, for which the region will continue to pay us.” That is, for the fact that Mikhelson is doing a profitable business in Kamchatka, he also wants an additional payment. And this despite the fact that his company is constantly getting preferences from the state – licenses are provided for new projects without auctions, direct state financing of part of the infrastructure is carried out – and this is only the minimum of what Novatek receives from the state, as he writes “Kommersant”.

It has long been known that Mikhelson also has connections with the influential businessman Gennady Timchenko, who is also a shareholder of Novatek – both are in the top ten richest people in Russia according to the Forbes list. He was also “friends” with the former governor of St. Petersburg, Valentina Matvienko, and arranged for her son to work in one of his companies. Mikhelson is also credited with connections with the first president of the Republic of Tatarstan Shaimiev through the TAIF group – I wrote about this earlier The Moscow Post. Appear next to the name of Michelson and other high-ranking officials, so it’s no wonder that this businessman feels so confident.

Novatek has been dwindling in revenue lately, which is not surprising given the problems with the “Arctic Cascade” technology that Mikhelson has dumped on it. Although, who knows, maybe this is exactly the strategy for the development of events that was planned from the very beginning.

If you look closely at the relationship tree of the Novatek company, it raises a lot of questions, first of all, why most of the companies affiliated with Mikhelson operate at a loss and close, despite the fact that, as we wrote above, he receives significant benefits from the government. Given the offshores to which they are “tied”, involuntary assumptions arise that this system of connections is quite suitable for withdrawing money. But Mikhelson does not seem to be at all embarrassed by this state of affairs, he feels confident and, probably, is not at all afraid of inspections and accusations of corruption.

Photo: Rusprofile.ru

Meanwhile, there are already many signs that the current situation is becoming critical. After all, what is Novatek doing now: having received state money to develop a new technology (although before that it already had a normally functioning one, according to which gas pipelines have been built in Russia for a long time), the company spent it without achieving a normal result, then terminated contracts with suppliers, blaming them for the failure and thereby putting the colossal project in jeopardy. And now it also requires additional preferences for the implementation of another project. Whether Mikhelson pursued any commercial goals when performing these actions, we will leave it to the law enforcement agencies to find out.