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Russia's Yamal LNG to fully market LNG from project, take FID regardless of export rights

The Novatek-led Yamal LNG consortium's marketing of LNG from theproject and final investment decision are not dependent on whether theRussian government would allow companies other than Gazprom to export gasfrom the country, representatives from Yamal LNG and Total said Tuesday.

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"It's important to understand that the question of export rights is notan obstacle [to making the FID], because buyers have committed on theunderstanding of our Gazprom Export agency agreement," Christophe Malet,deputy director of marketing and shipping at Yamal LNG said on the sidelinesof the CIS Oil and Gas Summit in Paris Tuesday.

The agency agreement, which states that Gazprom Export will export LNGfrom the project on the partners' behalf, was signed in 2010.

Novatek, which holds an 80% stake in the project, and Total, which has a20% stake, are awaiting a firm decision from the Russian government onwhether it would allow independent producers to export LNG from the country.

Currently, only state-owned Gazprom has the right to export gas,including LNG. Expected deadlines to resolve the issue have come and gone andthere is little clarity on if and when the government will take a decision.

Malet said that the company is working on concluding marketing of theproject as soon as possible.

"As we speak, about 60% of the project is under serious commitment,covered by heads of agreements or sale and purchase agreements," Malet said.

"There are a number of ongoing discussions for the remaining 40%, which may lead to agreements in the next few weeks," Malet said, adding that the project's focus is towards Asia.

Separately, a source close to the talks told journalists that four ofthese potential deals were with European companies, including BP and EDF, andfour with Asian companies. Among the list of potential customers are some whoare interested in an equity stake in the project, Malet added.

"Those buyers looking to take an equity stake are more concerned [about export liberalization] ... as the issue does have consequences for theproject's financing," Malet said.

In early February, Russian daily Izvestiya reported that a consortiumof banks organizing funding for Yamal LNG plans to seek only up to $5 billionif the law is not changed, citing sources in the energy ministry. If the lawis amended, the consortium comprising France's Societe Generale, Russia'sGazprombank and Sberbank plans to seek finance of up to $18 billion.

Novatek representatives had said previously that signing of offtakecontracts is conditional on liberalization of exports. Novatek CEO LeonidMikhelson said in March that future customers were ready to sign contractsfor around 80% of LNG from the project in the second quarter if thegovernment moved to liberalize exports. The company recently pushed thisdeadline back by 2-3 months.

Gleb Luxemburg, general director of Yamal LNG, said at the conferencethat liberalization of the LNG export market "is not the subject of the FID,that's more technical."

Total's technical director of Exploration and Production for ContinentalEurope and Central Asia Kevin Boyne added: "We believe that the technicalelements of the project are fully feasible."

Boyne conceded that the export of LNG is the most important issue to beresolved, but is "not a dealbreaker."

Novatek representatives said earlier that a final investment decisionwill be taken this year.

Boyne and Luxemburg added that the project partners' aim of launchingthe project in late 2016 remains feasible.

"It's a challenging target ... but it's just about feasible and we'restill working towards it," Boyne said.

Luxemburg added that all contractors "have agreed to the deadline of2016."

The second and third trains of the project are to be built over2013-2017 and 2014-2018, respectively. Each train has a planned capacity of 5million-5.5 million mt/year.

Yamal LNG is based on the resources of the South-Tambeiskoye field,which includes proven and probable reserves of 907 billion cubic meters ofnatural gas, as of December 31, 2012, under PRMS standards.

--Rosemary Griffin,
--Edited by Geetha Narayanasamy,