Novatek Expands Asian Ties

Novatek's Yamal LNG project shipped a first LNG cargo to Japan this week, a milestone in its growing presence in Asia that has seen deals struck with both China and Vietnam earlier this month.

The Japanese deliver was part of a long-term offtake agreement with Total, and the cargo was unloaded at the Tobata LNG Terminal. “Japan is an important LNG market and one of the priority destinations in our LNG marketing strategy,” said Leonid Mikhelson, Novatek’s Chairman of the Management Board. “Further development of our logistical chain using the Northern Sea Route and a transshipment terminal in Kamchatka will expand LNG supplies to Japan.”

An official visit to Russia by China's President Xi Jinping earlier this month saw a number of MoUs signed furthering business ties between the two nations. On June 5, Novatek, Sinopec and Gazprombank signed Heads of Agreement on establishing a joint venture to market LNG and natural gas to end-customers in China.

On June 7, Novatek announced the signing of a share purchase agreement with China's CNOOC for the sale of 10 percent of the Arctic LNG 2 project. The Arctic LNG 2 project involves the construction of three LNG trains at 6.6 million tons per annum each. Another agreement will see China's CNPC also take a 10 percent share, and another agreement with China COSCO Shipping, Sovcomflot and the Silk Road Fund will see joint development, financing and implementation of year-round logistics arrangements for shipping hydrocarbons from the Arctic zone of the Russian Federation to the Asia-Pacific region, as well as organizing transit cargo traffic along the Northern Sea Route between Asia and Western Europe.

“The Agreement represents an important milestone in developing the transportation of LNG produced by our Arctic projects along the Northern Sea Route,” said Mikhelson, who notes it will lead to the rapid transformation of the Northern Sea Route into a global and commercially effective transportation corridor between the Pacific and Atlantic basins. It also furthers Vladimir Putin's plan to increase Northern Sea Route annual cargo traffic to 80 million tons in 2024.

Also on June 7, Novatek signed an MoU on cooperation in Vietnam with Total Gas & Power Business Services, Siemens Aktiengesellschaft and JSC Zarubezhneft. The MOU envisages developing of an integrated energy-generating project with the use of LNG in Vietnam. Mikhelson says Vietnam's forecast growth in electricity demand is creating favorable conditions for gas-fired power generation and LNG supplies.

Novatek's upstream activities are focused on the Yamal-Nenets Autonomous Region, which is the world’s largest natural gas producing area and accounts for approximately 80 percent of Russia’s natural gas production and approximately 15 percent of the world’s gas production.