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Novatek plans to send 80% of future Arctic LNG-2 output to Asia: CEO

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Novatek plans to send 80% of future Arctic LNG-2 output to Asia: CEO

St. Petersburg — Russia's Novatek expects to send around 80% of production from its future 19.8 million mt/year Arctic LNG-2 project to the Asia-Pacific region, as the company is currently considering supplying around 50% of output from the project under long-term agreements, the company's CEO Leonid Mikhelson said Friday.

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"Our vision under the current marketing strategy is 80:20, naturally 80% [to go] to the Asia-Pacific region," Mikhelson told reporters on the sidelines of the St. Petersburg International Economic Forum.

Novatek expects to finalize the list of foreign partners for the project by the end of June and take a final investment decision later in the year. The project in the Arctic peninsula of Gydan will consist of three trains, with a capacity of 6.6 million mt/year each, to be launched in 2023, 2024 and 2025.

Earlier in the day, Novatek inked share purchase agreements with China's National Petroleum Corporation and CNOOC. Each of them are receiving a 10% interest in the project, with France's Total earlier purchasing a 10% interest.

Mikhelson declined to say what company is likely to become the fourth partner, with Saudi Aramco and Japan's Mitsui reportedly among the potential candidates.

Novatek is currently considering selling a "minimum 50%" of output under long-term contracts, as was discussed with its strategic partner Total, Mikhelson said. Final decisions, however, are likely to be taken by the consortium when it is fully formed.

In December, Novatek launched the 5.5 million mt/year third train of its milestone project, Yamal LNG, to bring its capacity to 16.5 million mt/year. It has already started work on a third LNG project, which will also be built also on the Yamal Peninsula.

Mikhelson said he believes Novatek may not need foreign partners to build the Ob LNG project.

"We're thinking it over," Mikhelson said. "But this is a small project, [to be built with the use of] our own equipment, our own license. We hardly need a partner," he said, adding that the project will be built near to the port of Sabetta, where the loading terminal for the first project is located.

Ob LNG may include three trains with a capacity of 1.6 million mt/year each, to be launched in 2022 and 2023. Novatek expects to test its own natural gas liquefaction technology, dubbed Arctic Cascade, at the 900,000 mt/year fourth train of Yamal LNG, to be commissioned later this year.

CHINA'S MARKET

Novatek also plans to deliver first cargoes to Chinese end-users via its joint venture with Sinopec by the end of the year, Mikhelson said.

Novatek, together with Gazprombank, Wednesday inked a deal with China's Sinopec to market LNG and gas to end users in China, with the documents signed during Chinese President Xi Jinping's official visit to Russia.

Novatek and Sinopec, which owns underground storage facilities and re-gasification terminal, "will set up a joint venture to invest into end-users," Mikhelson said, commenting on the deal.

"It is a unique agreement as no other foreign company supplies gas to end-users in China," he added.

The partners have roughly outlined volumes that they are ready to supply, with final decisions on the issue likely to be taken in 2020, Mikhelson said.

"We can even start delivering some small volumes by the end of this year," he added.

-- Nadia Rodova, nadia.rodova@spglobal.com; Rosemary Griffin, rosemary.griffin@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com