Yamal LNG project on track and on budget

Photo courtesy of Novatek.

(Reuters) Russia's Yamal LNG project, to build the country's second gas liquefaction plant, is on track and on budget with Novatek and its partners having invested $18.5 B so far, Novatek's CEO said.

The first phase of the project, in which Novatek is in partnership with France's Total, China's CNPC and the Silk Road Fund, is due to start operation sometime next year and Novatek's chief executive said it was 76% ready.

Russia is the world's biggest producer of conventional gas after the US, but wants to increase its production of LNG, which currently accounts for less than 5% of world output.
Investment in the Yamal project, which will require $27 B in total, was at risk after Novatek came under Western sanctions over Moscow's role in the Ukraine crisis, but the project has since secured funding from Chinese and Russian banks, as well from the Russian government.

"To date, we have resolved all issues related to Yamal LNG's financing," Leonid Mikhelson, Novatek's chief executive and a major shareholder, told reporters in comments cleared for publication on Monday. "In my opinion, we should implement similar projects on our own, not using (Russia state) budget financing in the future."

The Yamal facility will have three production lines when it is completed, each with a capacity of 5.5 MMtpy of LNG.

In April, Yamal LNG signed loan deals with Chinese banks worth over $12 B. It also secured Russian state funds worth $2.3 B from a rainy day fund and $4 B from state-controlled Russian lenders Sberbank and Gazprombank.

Russia currently operates just one LNG plant, on the Pacific Island of Sakhalin, led by Gazprom, with a capacity of around 10 MMtpy.

Sakhalin-2 plans to expand to add a third production line with a 5 MMtpy capacity sometime in the future. The US, Qatar and Australia, however, are also all expanding LNG production.

Novatek, Russia's second biggest producer of conventional gas, plans to commission its second LNG project, Arctic LNG-2, by 2025 with planned LNG production of up to 16.5 MMtpy.

Mikhelson declined to give a cost estimate for Arctic LNG-2 project and said that Novatek was not in a hurry to choose partners for the project.

Japan Bank for International Cooperation, which has signed up to help finance the Yamal project, is also ready to support the Arctic LNG-2 project, he said.

 

Reporting by Oksana Kobzeva; Additional reporting by Olesya Astakhova; writing by Katya Golubkova; editing by Dmitry Solovyov and Susan Fenton

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