Novatek Strengthens Ties with China

Russian independent gas producer Novatek signed November 1 a strategic co-operation agreement with the Chinese National Petroleum Company (CNPC) as well as a memorandum of understanding with China Development Bank.

The strategic co-operation agreement covers implementing the Arctic LNG 2 project, as well as collaborating in different segments of the LNG and natural gas markets, including LNG trading and gas infrastructure development, Novatek said. CEO Leonid Mikhelson said the companies had already a "history of effective co-operation, including the successful implementation of the Yamal LNG project. We believe our strategic co-operation agreement will further enhance our mutual relationship as well as open up new opportunities for both companies, utilising our experience in implementing LNG projects combined with the enormous opportunities in the Chinese market," which he described as one of the most promising gas markets in the world.

The MOU with the Chinese bank "confirms the parties’ intentions to co-operate in implementing the “Arctic LNG 2” project, as well as Novatek's other projects, including financing and investment into the capital of these projects. Mikhelson said the strategy envisages a rapid growth of LNG production using international financing sources. We already have a positive experience of cooperating with the China Development Bank on the Yamal LNG project, and we are glad to continue this mutually beneficial co-operation on our new LNG projects.

Novatek is cut off from US and western long-term financing generally by sanctions imposed on companies and individuals in the wake of the seizure of Crimea in 2014, months after it took final investment decision on Yamal LNG. That is due to start production and exports this year, meeting timetable and budget. It will be Russia's second LNG export project and the first export project not controlled by Gazprom, which is a 10% shareholder in Novatek.

William Powell