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25 Jul 2019, Stella Zlatareva, EMIS M&A Team

Japanese consortium joins China’s CNPC, CNOOC and France’s Total as investor in Russian LNG project Arctic LNG-2

Novatek, Russia’s largest private natural gas producer, has achieved its aim to sell to international investors 40% of its 19.8-million tonne liquefied natural gas (LNG) project on the Gydan Peninsula, north of Siberia. Over the past year, the company managed to shed three 10% stakes in the project known as Arctic LNG-2 to France’s Total and Chinese oil and gas majors CNPC and CNOOC. In June 2019, Novatek announced a deal with a consortium of Japanese corporations Mitsui & Co and JOGMEC. Under the agreement, the companies took a combined 10% interest for an estimated USD 3.6bn, which significantly tops Total’s USD 2.55bn purchase in 2018.

The agreement was signed during the G20 Summit in Osaka and envisages Mitsui and JOGMEC buying around 2 million tonnes of LNG per year on a long-term basis.

Once it commences production around 2023, Arctic LNG-2 will become Novatek’s third LNG project and its second in the Arctic Circle in Russia. The project will develop a plant for production of LNG involving three liquefaction trains with annual output capacity of 19.8 million tonnes of liquid gas. The project is estimated to cost up to USD 23bn to develop and it is based on the hydrocarbon reserves of the Utrenneye field (2P reserves of the field were measured at 1.14 billion cubic meters of natural gas and 57 million tonnes of liquids as of December 2018). LNG from Arctic LNG-2 will be delivered mainly to Asia and Europe via the Northern Sea Route.

Russia eyes a significant share in the global LNG market and aims to match one of the world’s dominant players, Qatar. The country already operates two LNG plants: Gazprom’s Sakhalin-2 and Novatek’s Yamal LNG, in which Total and CNPC also have stakes. Original source: EMIS - DealWatch

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