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Russia's Novatek loads first LNG cargo from Yamal LNG train 2


Production started July 21, train 2 at full capacity

In talks with CNPC, Kogas, Saudi Aramco, Japan companies on Arctic LNG 2 partnership

Port of Sabetta, Russia — Russia's Novatek loaded Thursday the first LNG cargo from its newly launched second 5.5 million mt/year LNG train at the Yamal LNG plant on the Yamal peninsula in the Russian Arctic.

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The second train of the company's flagship LNG project started producing LNG on July 21, six months ahead of the initial schedule, the company said in a statement.

The company previously shifted the timeframe for the second train's launch to September-October, before finally moving it to August.

The second train has already reached full capacity, putting Novatek's total LNG production at 11 million mt/year, it said.

Together, the two trains account for 3.5% of global LNG production, Novatek CEO Leonid Mikhelson said, adding the company's strategic goal is to produce 55-60 million mt/year by 2030.

Novatek launched its first Yamal LNG train in December, and has so far produced 3.5 million my from it.

The company plans to launch the third train with capacity of 5.5 million mt/year "in the first days of next year," Mikhelson said, adding it is possible the plant will produce 16.5 million mt of LNG in 2019.

The fourth train of 900,000-940,000 mt/year capacity is expected to follow in late-2019, he reiterated.

The actual capacity is higher, aided by low temperatures, he said, adding the company will fully analyze by next summer how far above nameplate capacity it can produce. Earlier, the company said Yamal was producing at 109% of its capacity.

Besides Novatek, which controls the project with a 50.1% stake, Total and CNPC hold 20% each in the project, with China's Silk Road Fund holding 9.9%.


Novatek is also in talks with prospective partners, including China's CNPC, Korean Kogas, Japanese companies, as well as Saudi Aramco, for its second planned LNG project, Arctic LNG 2, Mikhelson said.

"They are all going at approximately the same pace in terms of the talks timeframes. To consider [participation] they require a lot of information, and then they have to go through corporate procedures," he told reporters in a briefing.

France's Total was the first company to enter the project when it agreed earlier this year to buy 10% in Arctic LNG 2, with the option of increasing the stake to 15%. Novatek expects to fully close the deal in the first quarter of 2019, Mikhelson said.

The shareholding structure should be determined by the time of the planned final investment decision on the project by the end of 2019, he said. "We will be ready to take the investment decision around the end of the second quarter or early third quarter next year. Our plan is to take the investment decision by the end of 2019. It is very good when partners enter before the FID," he said.

The project, to be built on the Gydan peninsula across the bay from Yamal LNG, envisages three trains with 6.6 million mt/year capacity each.

Provisional launch dates foresee 2022-23 startup for the first train, 2024 for the second and 2025 for the third.

Kogas, with whom Novatek signed a memorandum of understanding on potential LNG cooperation in June, "is studying the project in detail, especially after the South Korean president's visit in June," Mikhelson said.

Saudi Aramco as well as CNPC continue to study the project's details, with Novatek also offering "great conditions" to prospective Japanese partners, Mikhelson said. "We were in dialog with Japanese partners on Yamal LNG. Then we had our French partners, Chinese, but the [Japanese] never came. I expect they will take the right decisions, they are very professional people capable of working with LNG. We would like to see them as partners," he said.

While the company had contracted some 96% of Yamal production volumes, it plans to only cover half of Arctic LNG 2 with long-term contracts, selling the rest on the spot market, including based on the Kamchatka hub price, he said.

The company plans to launch the Kamchatka transshipment terminal to cut shipment costs by reloading LNG from icebreakers onto general tankers, and make it a hub for price-setting, as it expects the market to move away from oil-linked contracts over time.

"It is very important to create a hub for Russian gas going to the Asia-Pacific. If we manage to have a hub of 20 million mt/year in capacity by 2024-2025, then there will be Henry hub, and there will be Kamchatka hub," Mikhelson said.

--Nastassia Astrasheuskaya,

--Edited by Jeremy Lovell,