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    Novatek Sells 10% in Arctic LNG 2 to Japanese Firms

Summary

Novatek is now ready to take final investment decision in Q3.

by: William Powell

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Novatek Sells 10% in Arctic LNG 2 to Japanese Firms

Russian independent gas producer Novatek is selling 10% of the shares in Arctic LNG 2 project to a Dutch-registered Japanese consortium consisting of Mitsui & Co (25%) and Japan Oil, Gas and Metals National Corporation (Jogmec, 75%). The agreement leaves Novatek with 60% and paves the way for the final investment decision in the third quarter.

Novatek said it had signed the sales and purchase agreement, which includes the long-term LNG offtake of about 2mn mt/yr, after the G20 summit in Osaka. The agreement will close in the nearest future subject to regulatory approvals.

Novatek CEO Leonid Mikhelson said he welcomed "the consortium of Mitsui and Jogmec as partners in our Arctic LNG 2 project.” He said the Japanese companies had "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”.

Mitsui said Novatek's estimate of the total development cost is around $ 21-23bn, although Russian president, Vladimir Putin, reportedly said the buyers would pay almost $3bn. Mitsui said that after participation and following a final investment decision with partners, LNG production is due to start around 2023. Other partners are a subsidiary of the French company Total; a subsidiary of China National Petroleum Corporation; and a subsidiary of China National Offshore Oil Corporation, all with 10% stake each.

Arctic LNG 2 will comprise three LNG trains with capacity of 6.6mn mt/yr each, using gravity-based structure (GBS) platforms, saving a third of the cost of Yamal LNG where the trains were built on thermally insulated piles sunk deep into the permafrost. Feedstock gas will come from the Utrenneye field, on the Gydan Peninsula. 

Jogmec's origins go back to 1967, when Tokyo set up the Japan Petroleum Development Corp to ensure a stable, inexpensive supply of oil. It later added gas and minerals to its remit.