RUSSIA MONITOR

Date: 25 November 2019

Novatek Boasts of Rising Output: Foreign Investors Enter Russian LNG Terminals

Russia’s biggest private gas firm has beefed up its status as a leading natural gas producer and a top liquefied natural gas supplier in the Far North. Unlike Rosneft, its top energy rival in Russia’s Arctic, that counts on nothing but Vladimir Putin’s discretionary decisions and his pressure on the country’s business and state actors, Novatek enjoys both the aid from the government and more excellent opportunities to entice foreign investors.

SOURCE: NOVATEK.RU

In 2019, the Yamal LNG project will deliver far more liquefied natural gas volumes than first intended, Novatek CEO Leonid Mikhelson has boasted recently. Speaking at the Eurasian Economic Forum, Mikhelson said that the company’s Yamal LNG energy project –– launched back in 2018 –– will have a production capacity of over 18 million tons in 2019, which is 1.5 million tons more than initially expected. Mikhelson did not explain what is behind his firm’s favorable figures. Yet, earlier he had revealed that Novatek’s three plants run more efficiently due to their additional exposure to Arctic temperatures. And yet, with higher production comes the need for larger export capacity, at least more important than planned, with LNG volumes needing to be both loaded and shipped overseas. Novatek seems to keep its eye on Asia’s Far East, or where a Kamchatka-based terminal will become its top energy asset. Mikhelson said Novatek will soon boost the capacity of LNG transshipment complexes, even by a third, both of which are currently being built in the territories of Kamchatka and Murmansk. Novatek will construct the two terminals jointly with a logistics company Mitsui OSK Lines and the Japan Bank for International Cooperation (JBIC). Under the accord, the Japanese entities will acquire some shares in the two projects in exchange for financial support. Novatek’s business cooperation with Japan has dated back to the time where the latter helped fund the Russian company’s Yamal LNG and Arctic LNG-2 plants. Among other firms that expressed their interest in constructing the terminals is France’s Total, as part of its deal with Novatek. Total will have a 10 percent stake in Novatek’s both terminals.

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In March 2019, the Russian government approved a comprehensive plan for the implementation of the construction of a marine LNG transshipment facility in Kamchatka. Under the arrangement, Novatek is set to allocate as much as 70 billion roubles in its latest investment. The company has been offered the full support of the Ministry for the Development of the Russian Far East and the government of the Kamchatka Region. The terminal is poised to become a critical part of Vladimir Putin’s plan for the prompt development of Russia’s Far North, with the increased potential of the Northern Sea Route seen as the topmost priority. With a new LNG facility in Kamchatka, maritime transport via the Arctic Sea is presumed to rise to 31.4 million tons by 2026 from 9.7 million tons in 2017. In the first quarter of 2020, Novatek should be greenlighted to build a transshipment plant, set to become ready between 2020 and 2021. Both port infrastructure facilities and the first loading system are tipped to begin functioning by 2022 while the second – by 2023.

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