Novatek Plans for 55mn mt/yr LNG by 2030: Reports

Russia's largest private gas company, Novatek plans to double gas production to 126bn m³/yr and produce 55-57mn metric tons (mt)/yr of liquefied natural gas (LNG) by 2030, according to reports in Russian media.

CEO Leonid Mikhelson announced December 12, a day after shipping the first cargoes of LNG from the $27bn Yamal LNG project, that Russia will be able to produce more than 80mn mt/yr LNG by 2030, of which Novatek's share would be two thirds. At some later date it will produce up to 70mn mt/yr, he said, without giving details.

CFO Mark Gyetvay also told journalists that the company plans to invest Rbs2.8 trillion ($46.7bn) in LNG projects between 2018-2030.

The first train of Yamal LNG/Arctic-1 LNG which has 5.5mn mt/yr capacity was inaugurated December 5 in the presence of one man who helped make it possible: Vladimir Putin, the Russian president who authorised tax breaks and guaranteed state funds and other assistance. The project’s final capacity is 17.4mn mt/yr. The rest of the 55-57mn mt/yr will come from Arctic-2&3, yet to be finally decided.

Arctic-2 LNG is expected to cost about $19bn costs and to produce 18.3mn mt/yr by 2023, which would be a big cost saving as Yamal LNG was budgeted at $27bn.

Novatek has 50.1% stake in Yamal LNG, and plans to sell stakes in Arctic-2 LNG as well. Other shareholders are France’s Total and China’s CNPC, each with 20%; and China’s Silk Road Fund owns the remaining 9.9%. 

Gyetvay said that Arctic-1 LNG is expected to generate operating cash flows of $62bn by 2030, with $400-450mn/yr operating expenditures.

He added that Arctic-2 LNG which will have 30% lower capital expenditure than the first plant is also expected to receive the same tax breaks.

According to him, the company’s cumulative gas production during 2018-2030 will be about 820bn m³, of which 432bn m³ (270mn mt) would be liquefied for exports. Novatek’s proved and probable gas reserves as December 31, 2016 – including shares in joint ventures – stood at 1,755bn m³ and 1,312bn m³ respectively.

The company plans to conduct further geological exploration, expected to increase its proved gas reserves by 821bn m³ by 2030.

Mikhelson also said that the company is also ready to consider participation in foreign LNG projects, but plans to concentrate on investing in regasification terminals. He noted that this decision is due to the fact that LNG projects in Russia are much more profitable than foreign ones.