Page 131 - RusRPTMar21

Shenergy, a Chinese energy company, Kommersant reports. The agreement envisages the delivery of 3mnt over 15 years (0.2mnt/a). The source of LNG is likely to be Arctic LNG 2. The supply terms are DES and the contract price is linked to oil.
According to the paper, the total amount of LNG contracted from Arctic LNG 2 is just above 50%, and therefore it might be insufficient to obtain bank financing, based on the past experience of LNG projects. However, the development of the spot LNG market might have changed this.
As a reminder, management has guided that it expects the project to obtain project financing by mid-2021. We believe the company is unlikely to face any notable difficulties, given the current gas market conditions, and think it will finally secure the project financing for Arctic LNG 2 in the guided amount of $11bn. Overall, we expect Novatek to be active in finding customers for Arctic LNG 2 around this time, so treat this news as in line with expectations.
In its 4Q20 reporting, Novatek disclosed that it had signed the first long-term and medium-term agreements for supplies of LNG from Arctic LNG 2. Additionally, back in 2019, the company reported signing non-binding supply agreements with Vitol and Repsol, for 1mnt/a of LNG for 15 years each (see our Morning Comment of 10 April 2019). So, given the disclosed amounts, Novatek itself has contracted sales of 2.2mnt/a or more, while 40% of the projects volumes have been contracted by other Artic LNG 2’s owners (Total, CNPC, CNOOC, Mitsui, JOGMEC). Arctic LNG 2’s capacity is planned at 19.8mnt/a.
Novatek held its FY20 results call on February 18 with details on its plans
ESG The company started off the call by highlighting its environmental and climate change targets until 2030. The company adopted a “think green, think natural gas” theme, which management said reflects its goal to produce green LNG. Novatek is actively working with Siemens Energy on de-carbonization.
The company highlighted the following goals for 2030 (vs. 2019) in its presentation: Reduce methane emissions by 4%.
Reduce air pollutant emissions by 20%.
Reduce GHG emissions per unit at upstream facilities by 6%. Reduce GHG per ton of LNG produced by 5%.
Increase the APG utilization rate.
Increase the share of waste directed to utilization and disposal. Novatek was the first and only Russian oil company to receive an A
131 RUSSIA Country Report March 2021 www.intellinews.com