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Russia's Novatek to start up Yamal LNG third train by end-2018: CEO

Barcelona — Russia's Novatek is set to start exporting LNG from its third 5.5 million mt/year train at the Yamal LNG project by the end of 2018, CEO Leonid Mikhelson said late Monday.

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The LNG producer has brought all of its Yamal LNG trains on track ahead of schedule, with guidance previously stating that the third train would begin commercial operations at the start of 2019.

Speaking on the sidelines of the Gastech conference in Barcelona, Mikhelson said Novatek could review its strategy to reach 57 million mt/year of LNG production by 2030 in the coming years as it continues to expand its already huge gas resource base in northern Russia.

He also said he expected some 80% of its future LNG production to serve the Asian market, with future sales to China in the local Yuan currency under consideration.

"In 2021, or 2022, we may review our strategy to reach 57 million mt/year by 2030," Mikhelson said.

Novatek brought online its first 5.5 million mt/year LNG train at the three-train Yamal LNG facility in December last year, and has since commissioned the second train.

The company is also close to making final investment decision on a new LNG plant -- Arctic LNG 2 -- which would have a production capacity of 19.8 million mt/year.

"We expect to take FID in the middle of next year, and definitely before the end of the year," Mikhelson said.

FIDs on new LNG supply projects have become increasingly scarce following the fall in LNG prices on the back of an oversupplied market, and expectations of a supply glut persisting well into the 2020s.

Novatek, however, is moving forward with its plans on the expectation of growing LNG demand. Mikhelson said global LNG demand could even reach 700 million mt/year by 2030 as new countries begin LNG imports.


Novatek has yet to finalize the partnership structure for Arctic LNG 2, but with FID planned for mid-2019, Mikhelson said the ownership of the plant would be set following the completion of FEED work.

"We have decided to keep 60% for ourselves -- that is the current plan -- having already sold 10% to Total," he said.

"We are negotiating with a number of other companies," he said, including Saudi Aramco and China's CNPC, which have expressed interest in the project.

"All potential partners have studied the upstream part of the project, and in the next three weeks we will complete the FEED work, and they will want to see the results before making a final agreement," he said.

Mikhelson said he was confident that Novatek would be able to bring costs down for each train as the company develops new plants, with Arctic LNG 2 set to be 30% cheaper, in terms of capital expenditure, than the $28 billion Yamal LNG plant.

External financing for Arctic LNG 2 would be required for no more than 30% of the total budget, he said.


As well as producing LNG, Novatek is planning two transshipment centers -- one in the east in Kamchatka and one in the west at Murmansk -- to optimize shipping.

Novatek can use its chartered icebreaker fleet to export LNG to the transshipment centers from where it can load it onto conventional LNG tankers.

Mikhelson said work to build the Murmansk transshipment point had already begun with commissioning set for the end of the first half of 2019.

-- Stuart Elliott,

-- Edited by Norazlina Jumaat,