Novatek could make an FID on the project this month, after Mitsui and JOGMEC committed to a 10% stake in the massive LNG export facility
Novatek’s US$23Bn Arctic LNG-2 project is a step closer to FID after Japanese companies Mitsui and government-linked Japan Oil, Gas and Metals National Corporation (JOGMEC) acquired a 10% stake in the project.
Novatek’s proposed LNG plant in the Russian Arctic consists of three trains, each with a capacity of 6.6 mta. Front-end engineering and design for the project was completed last year, confirming preliminary cost estimates of between US$20Bn and US$21Bn. Novatek is believed to be targeting FID this month or next, with start-up of the first train scheduled for 2022-2023.
Mitsui and JOGMEC’s purchase of the 10% stake via a Dutch joint venture company, Japan Arctic LNG BV, was announced in the presence of Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe at the G20 meeting in Osaka. President Putin said Japanese investments in the project would total almost US$3Bn. Mitsui will have a 25% share of the stake, and JOGMEC 75%.
Mitsubishi is also rumoured to be interested in joining the newly created joint venture, according to energy research firm Wood Mackenzie.
Wood Mackenzie Asia Pacific gas & LNG research director Nicholas Browne said, “Mitsui will undoubtedly be responsible for marketing the 1.98 mta of equity LNG from the 10% stake.
“Mitsui will look to sell some of the volumes within Japan”, said Mr Browne. “However, it may also look to trade and sell Arctic-2 volumes into the Atlantic basin. The strong backing of JOGMEC highlights that this is seen as a strategic investment by the Japanese Government.”
Wood Mackenzie senior research analyst, Russia Upstream Nikolai Novikov, noted, “Energy security considerations, the investment attractiveness of Arctic LNG-2 and improving Russo-Japanese relations have proved deciding factors in getting both Japanese state and private enterprise on board”.
In June, Novatek’s Yamal LNG shipped its first LNG cargo to Japan under a long-term agreement with France’s Total.
Earlier this year, Total (10%) finalised its entry in the Arctic LNG-2 project, while China’s CNPC and CNOOC Ltd each took 10% stakes earlier this year. If Novatek decides to lower its stake to under 60%, Total will have an option to buy another 5% in the project.
“With this announcement, the shareholding structure could be final”, said Mr Novikov. The next big step will be FID”.