Chinese Giants Buy Into Russian LNG

Russian independent Novatek reported June 7 that it has signed off on the sale of stakes in its Arctic LNG 2 project to two Chinese state giants. 

Share purchase agreements for 10% stakes were signed with China National Petroleum Corporation (CNPC) and China National Offshore Oil Corporation (CNOOC). The agreements will close “in the nearest future” pending approval by Russian and Chinese regulatory authorities, Novatek forecast in a statement.

The announcement came shortly after Novatek had announced it will team up with a Chinese state fund to develop shipping services to export LNG from its projects. Chinese gas demand continues to grow dramatically. The country is now the world's second-largest importer of LNG, and is expected to overtake Japan to take top spot in the coming years.

The deals with the Chinese buyers were first announced in April. In March, French Total took a 10% stake, leaving Novatek with 70%. Novatek CFO Mark Gyetvay revealed last month that the company was in talks to sell a further 10 % stake in Arctic LNG 2 – which will have three LNG trains of 6.6mn mt/yr each, liquefying gas from the Utrennee field in Russia's far north –  in order to raise funds to power its ambitions.

Novatek wants to hold 60%, so another 10% stake is about to be sold, the company official told a conference. "In a relatively short time we will announce a fourth partner," he said.

Novatek is busy accelerating new projects. The company has boosted its profile with a strong push to export LNG from projects in the far east and Arctic since the Yamal LNG project, with three trains each of 5.5mn mt/yr, went online in 2017. It hopes to reach an FID on the Arctic 2 LNG project by the third quarter of 2019, and last month said it plans to raise its target for LNG production capacity to 70mn mt/yr by 2030, up from the previous goal of 57mn mt/yr.