China is further strengthening its links with the Russian energy sector, recently signing up to participate in the next Russian liquified natural gas (LNG) mega-project known as Arctic LNG 2. The deal was originally outlined in April.
On July 22, Novatek announced the final closing of the sale of participation interests in the Arctic LNG 2 Project to a wholly owned subsidiary of China National Petroleum Corporation (CNPC), a wholly owned subsidiary of China National Offshore Oil Corporation (CNOOC), and a consortium comprising Mitsui & Co and Japan Oil, Gas and Metals National Corporation (JOGMEC).
The shareholders are Novatek (60%), Total (10%), CNPC (10%), CNOOC (10%) and the Japan Arctic LNG consortium (10%).
"We now have formed the structure of the project's participants by successfully closing the sale of interests in Arctic LNG 2," notes Leonid Mikhelson, Novatek's chairman of the management board. "The target level of Novatek's participation has been reached, allowing us to make the final investment decision and optimally use the company's cash flow to finance our new projects."
Novatek plans to start producing LNG at Arctic LNG-2 in 2022-2023. The overall project costs are estimated at around US$25 billion.
Novatek has said that it intends to hold 60% of the project, and has no plans to bring in additional equity partners.
However on August 12, Russian Deputy Energy Minister Anton Inyutsyn was quoted on the Energy Ministry's website as saying that Novatek is interested in supplying LNG from its Arctic LNG-2 project to Indian companies.
The Arctic LNG 2 project will draw from the hydrocarbon resources of the Utrenneye field. It envisages constructing three LNG trains at 6.6 million tonnes per annum each.
With LNG shipments already coming by sea from Yamal, and its involvement in Arctic LNG 2 now in place, China is also preparing for the first gas to be delivered by the Power of Siberia pipeline.
In May 2014, Gazprom and CNPC signed a sales and purchase agreement for gas to be supplied via the eastern route (Power of Siberia gas pipeline). The 30-year agreement is for Russian gas deliveries to China in the amount of 38 billion cubic meters per year. Gas supplies are scheduled to start this coming December.
In September 2014, Gazprom began the construction of Power of Siberia's first section, running 2,200 kilometers from the Chayandinskoye field (Yakutia) to Blagoveshchensk (Chinese border).
The second phase of the project will include the construction of a section stretching for about 800 kilometers from the Kovyktinskoye field (Irkutsk Region) to the Chayandinskoye field. The third stage provides for expanding gas transmission capacities between the Chayandinskoye field and Blagoveshchensk.
(Writing by Emma Yang Editing by Harry Huo)
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