Novatek one step closer to Arctic LNG 2 FID as Japanese duo enters project

Russia’s Novatek and a consortium of two Japanese companies – Mitsui and JOGMEC – have signed a sales and purchase agreement for a 10% participation interest in the Arctic LNG 2 project. This move, according to Wood Mackenzie, brings Novatek one step closer to project FID.

Image of LNG Plant

The participation in the project also provides for the long-term LNG offtake of approximately two million tons per annum by the Japanese partners, Novatek said in a statement on Saturday.

In a separate statement on Saturday, Mitsui said that the share would be acquired through the Dutch Company, Japan Arctic LNG B.V., in which Mitsui has invested jointly with JOGMEC. The acquisition will be completed as soon as the relevant regulatory approvals have been obtained. The equity ratio of JOGMEC and Mitsui will be set at 75% and 25% respectively.

For participation in this project, Mitsui is expecting overseas investment insurance from Nippon Export and Investment Insurance (NEXI) to cover its equity portion.

The project will develop natural gas and liquefaction facilities with a production capacity of 19.8 million tonnes per year from the conventional onshore gas field located on the Gydan Peninsula within the Arctic Circle, north of the Russian Federation.

Novatek started production at the nearby Yamal LNG project in 2017, and this project will be the company’s second LNG project in the Arctic Circle in Russia.

Novatek’s estimate of the total development cost is currently around $ 21-23 billion. The project plans to start production of LNG from around 2023.

LNG from the project will be delivered mainly to Asia and Europe via the Northern Sea Route. Other partners of the project are a subsidiary of the French company Total, a subsidiary of China National Petroleum Corporation (CNPC), and a subsidiary of China National Offshore Oil Corporation Limited (CNOOC) with a 10% stake each.

Leonid Mikhelson, Novatek’s Chairman of the Management Board, said: “Japan has 50 years of experience with importing LNG and is one of the largest LNG consuming countries. Moreover, Japanese companies have extensive experience in implementing LNG projects as well as marketing LNG around the world. The entry of Japanese partners into Arctic LNG 2 will contribute to its successful implementation.”

 

Arctic LNG 2 step closer to FID 

 

Commenting on the entry of two Japanese companies into the Arctic LNG 2, Wood Mackenzie said that the project is now a step closer to final investment decision (FID).

Novatek’s proposed liquefied natural gas plant in the Russian Arctic consists of three trains, each with a capacity of 6.6 million tonnes per annum (mmtpa). Front-end engineering and design was completed last year, confirming preliminary cost estimates of between $20 billion and $21 billion. According to WoodMac, Novatek is believed to be targeting FID this month or next, with start-up of the first train scheduled for 2022-2023.

Mitsui and JOGMEC’s purchase of the 10% stake via a joint venture was announced in the presence of Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe at the G20 meeting in Osaka. President Putin said Japanese investments in the project would total almost $3 billion.

Although there are no concrete plans at the moment, Mitsubishi is rumored to be interested in joining the newly-created joint venture, WoodmMac said.

Nicholas Browne, director, Asia Pacific Gas & LNG research at Wood Mackenzie, said: “Mitsui will undoubtedly be responsible for marketing of the 1.98 mmtpa of equity LNG from the 10% stake.

“Mitsui will look to sell some of the volumes within Japan. However, it may also look to trade and sell Arctic-2 volumes into the Atlantic basin. The strong backing of JOGMEC highlights that this is seen as a strategic investment by the Japanese government.”

Nikolai Novikov, Senior Research Analyst, Russia Upstream, at Wood Mackenzie, added: “Energy security considerations, the investment attractiveness of Arctic LNG 2 and improving Russo-Japanese relations have proved deciding factors in getting both Japanese state and private enterprise on board.”

WoodMac also said that, if Novatek decides to lower its stake to under 60%, Total would have an option to buy another 5% in the project.

Novikov added: “With this announcement, the shareholding structure could be final. The next big step will be FID.”

Location of Arctic LNG 2 Project

Offshore Energy Today Staff


Spotted a typo? Have something more to add to the story? Maybe a nice photo? Contact our editorial team via email.

Offshore Energy Today, established in 2010, is read by over 10,000 industry professionals daily. We had nearly 9 million page views in 2018, with 2.4 million new users. This makes us one of the world’s most attractive online platforms in the space of offshore oil and gas and allows our partners to get maximum exposure for their online campaigns. 

If you’re interested in showcasing your company, product or technology on Offshore Energy Today contact our marketing manager Mirza Duran for advertising options.

Share this article

Follow Offshore Energy Today

Events>

<< Dec 2019 >>
MTWTFSS
25 26 27 28 29 30 1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31 1 2 3 4 5

Africa Oil Week 2020

For over 25 years Africa Oil Week has been the meeting place for Africa’s most senior E&P stakeholders.

read more >

CERAWeek 2020

 Each year, CERA clients gathered for a few days in Houston…

read more >

Offshore Technology Conference (OTC) 2020

The Offshore Technology Conference (OTC) showcases leading-edge technology for offshore drilling, exploration…

read more >

2020 EXPLORATION AND PRODUCTION STANDARDS CONFERENCE ON OILFIELD EQUIPMENT AND MATERIALS

The development of consensus standards is one of API’s oldest and most successful programs.

read more >

Jobs>

Looking to fill a job opening?

By advertising your job here, on the homepage of OffshoreEnergyToday.com, you'll reach countless professionals in the sector. For more information, click below...

apply

Looking to fill a job opening?

By advertising your job here, on the homepage of OffshoreEnergyToday.com, you'll reach countless professionals in the sector. For more information, click below...

apply