Novatek, CNPC Agree on 15-Year LNG Supply

Russia’s Novatek signed a preliminary agreement with China National Petroleum Corp (CNPC) for a 15-year supply of no less than 3 million tons of LNG per annum, reads a note released on Tuesday by Russia’s second-largest gas producer.

“We welcome the achievement of a mutually beneficial agreement on LNG supplies to the fast growing Chinese market,” said Leonid Mikhelson, Chairman of the Management Board of Novatek.

The contract includes the possibility of supply extension. It also defines that the LNG price will be indexed to the Japanese Crude Cocktail.

Last month, CNPC purchased a 20% equity share in the Yamal LNG project. The agreement was signed in the presence of the President of Russian Federation Vladimir Putin and the Chairman of People’s Republic of China Xi Jinping. Recently, the two companies also signed a memorandum for joint upstream activities in East Siberia.

Russia will liberalize its liquefied natural gas exports (LNG) in less than three months, Energy Minister Alexander Novak said last week during the World Energy Congress.