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    Russian Novatek Sells 9.9% Yamal Stake to Silk Road

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Summary

Novatek has sold 9.9% of the Yamal LNG project to China’s Silk Road Fund (SRF) for €1.087bn, it said March 15.

by: William Powell

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Natural Gas & LNG News, Corporate, Mergers & Acquisitions, Investments, Political, Regulation, Infrastructure, Liquefied Natural Gas (LNG), News By Country, Russia

Russian Novatek Sells 9.9% Yamal Stake to Silk Road

Russia's biggest independent gas company Novatek has sold 9.9% of the Yamal LNG project to China’s Silk Road Fund (SRF) for €1.087bn, it said March 15.

Following the deal, Novatek has a 50.1% stake and French Total and China National Petroleum Corp remain with 20% each. Total also owns a minority stake in Novatek.

The terms were agreed in December but closure was subject to certain amendments to the intergovernmental agreement between Russia and China coming into force. The parties also signed that month an agreement for a 15-year loan worth about €730mn for the purpose of financing of the Yamal LNG project, which has already been transferred.

Novatek CEO Leonid Mikhelson said the sale was "another important step in the execution of our long-term development strategy. With the closure of this transaction we will achieve the appropriate target shareholder structure, which will contribute to the planned financing of the project and further facilitate its successful implementation.”

Novatek's co-owner Gennadi Timchenko, believed to have close ties with the president of Russia, Vladimir Putin, is on a list of entities and individuals hit by US sanctions, in retaliation for Russia's apparent involvement in destabilising Ukraine. This makes it difficult for projects in Russia to acquire foreign technology, such as liquefaction; and to arrange project finance. The weaker ruble has also limited their scope to buy in equipment, for example.

A consequence of sanctions has been to force the development of state-of-the-art technology within Russia although so far it looks as if the technology needed might have to come from China. Novatek was not available to comment on the possible sources of the technology.

Putin has also expressed determination that the project in Russia's hostile north will succeed, using state funds to help it along if need be. The project is at the active construction stage, Novatek said.

Yamal LNG entails a 16.5mn metric tons/year export plant using gas from the South Tambei field. Most of the output has been sold to European and Asian buyers. Experimental voyages have proved that the sea is navigable eastwards for most of the year with exports to Europe possible year-round.

US engineers DeGolyer & MacNaughton appraised the field’s proven and probable reserves using Petroleum Reserves Management System standards at 926bn m³ as of the end of 2015.

The Silk Road Fund is a $40bn medium- to long-term investment and development fund established in Beijing in December 2014. It buys equity stakes and lends money, mostly to infrastructure, energy/resources and other projects linked to the Chinese economy.

 

William Powell