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Novatek approves Arctic LNG 2 development



Novatek and other project shareholders including Total, CNOOC, CNPC and Japan Arctic LNG have approved the final investment decision (FID) for the Arctic LNG 2 development.

The $21 billion Arctic LNG 2 project is expected to being exporting by 2023, with completion set for 2026
(Image via Novatek)

The FID commits the companies to proceed with financing and engineering contracts worth a total of $21 billion.

The project is aiming to export its first LNG cargo by 2023, with a second train starting up in 2024 and third in 2026.

“I have no doubt that the project will be implemented as planned,” said Leonid Mikhelson, Novatek’s Chief Executive Officer who made the announcement alongside Russia’s Energy Minister Alexander Noval at the Eastern Economic Forum in Vladivostok on Thursday.

Located on Russia’s Gydan peninsula, the project will have a production capacity of 19.8 million tons per year of liquefied natural gas from the Ultrenneye onshore gas and condensate field. 

“Arctic LNG 2 will leverage the success of the Yamal LNG project and will deliver competitive LNG to the markets in four years’ time," said Patrick Pouyanné, Chairman and CEO of Total. 

“Arctic LNG 2 adds to our growing portfolio of competitive LNG developments based on giant low cost resources primarily intended for the fast growing Asian markets.”

The project is said to have very low upstream costs, thanks to the available usage of existing infrastructure and logistics facilities from the nearby Yamal LNG. Three concrete gravity-based structures will be constructed in the Gulf of Ob, each with a 6.6Mt/y liquefaction train, that is said will contribute to significant capex reduction of more than 30% per ton of LNG compared to Yamal.

“Arctic LNG 2, based on its costs, is the largest project in the history of Japanese-Russian relations,” said Hiroshige Seko, Japan’s Minister of Economy, Trade and Industry.

Gas produced from the field will be delivered to international markets by a fleet of ice-class LNG carriers using the Northern Sea Route and transshipment terminal in Kamchatka for cargoes to Asia, and the transshipment terminal close to Murmansk for cargoes destined for Europe.

The project will be a major step for the Russian LNG market. Last year the country was responsible for 8% of the global LNG market; they aim to increase that to 20% by 2035.

Novatek hold a 60% interest in the venture, while Total have a direct interest of 10%, plus an indirect ownership of 11.6% through its 19.4% stake in Novatek (totalling an aggregated economic interest of 21.6% in the project). CNOOC retain a 10% interest, CNPC 10% and Japan Arctic LNG - a Misui-Jogmec consortium - the remaining 10%.

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Novatek approves Arctic LNG 2 development - Time to read 3 min
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