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Russian Novatek sees 2019 natural gas output to jump 10%, oil to rise 2% on year: report

Highlights

Expects proposal from Saudi Aramco on Arctic LNG-2 in Mar-Apr

France's Total mulls operating Murmansk LNG terminal

To take investment decision on third LNG project in 2021

Moscow — Russia's Novatek expects gas and liquids production to continue growing in 2019 to load its flagship Yamal LNG project, which was brought to full capacity late last year, Novatek's CEO Leonid Mikhelson said Thursday, as reported by Prime news agency.

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"We're increasing gas production by up to 10% taking into account Yamal LNG, with liquids output, including crude and condensate, to grow by around 2%, I think," Mikhelson was quoted as saying on the sidelines of the World Economic Forum in Davos.

If so, gas production is to grow to nearly 76 billion cubic meters this year, compared to 68.81 Bcm in 2018. Oil production is to exceed 242,000 b/d, rising from nearly 237,000 b/d last year.

The $27-billion Yamal LNG project in the Arctic ramped up to full capacity of 16.5 million mt/year in mid-December 2018, following the launch of the third 5.5 million mt/year production train in late November.

The company is actively developing its vast resource base and expects to dramatically increase output between 2020 and 2030 as it is already working on the second and third LNG plants to be built close to the first project.

The company's gas production is expected to double to 126 Bcm/year and liquids output to rise 55% to over 360,000 b/d within the next 13 years, according to the strategy.

NEXT PROJECTS

Novatek also expects to receive official offers from potential partners in its next project, Arctic LNG-2, in March-April, Mikhelson said.

The company seeks to attract foreign partners for at least 40% of the project and take a final investment decision this year. Novatek's strategic partner France's Total already has a 10% in the Arctic LNG-2.

Saudi Arabian officials confirmed their interest in the project in the past, but Mikhelson said the talks have been informal so far.

"I expect we'll receive the main proposals from potential investors in March-April, if not February," Mikhelson said.

Mikhelson plans to meet both Total and Saudi Aramco during the Davos forum, he added.

Novatek plans to launch Arctic LNG-2 in 2022-2025. The project is to consist of three trains, with a capacity of 6.6 million mt/year each.

The company also plans to take an investment decision on construction of a third LNG plant in 2020-2021, Mikhelson said.

The plant will consist of two or three LNG trains, with capacity of 3-4.8 million mt/year each, based on Novatek's own natural gas liquefying technology.

Novatek plans to test the technology, dubbed Arctic Cascade, at the fourth 1 million mt/year train of the Yamal LNG project, to be built by the end of 2019.

Yamal LNG is being developed in partnership with Total, which owns a 20% stake in the project, CNPC (20%) and China's Silk Road Fund (9.9%). Novatek owns a 50.1% interest in the project.

TOTAL MAY OPERATE MURMANSK TERMINAL

Total, which also owns nearly 20% in the Russian company, is interested in operating the future LNG transshipment terminal in Murmansk, while Japanese companies are interested in taking part in the Kamchatka terminal in the east, Mikhelson said.

"We don't need partners for [those projects]. But we'll attract operators for them... If Total maintains its interest, we'll agree to them receiving a stake [in the project]," Mikhelson was quoted as saying by the report.

Novatek plans to build LNG transhipment terminals -- near Murmansk in the Barents Sea in the west, and on the Kamchatka peninsula in the Far East, with a capacity of 20 million mt/year each. The terminals are to ensure greater efficiency of LNG transportation as its LNG projects involve expensive shipments by Arctic-class tankers via the icy waters of the Northern Sea Route.

--Nadia Rodova, nadia.rodova@spglobal.com

--Edited by Ikhhlaq Singh Aujla, newsdesk@spglobal.com