Page 98 - RusRPTAug19

Japan from Novatek's first LNG project Yamal.
Russia's second-largest gas producer and global liquefied natural gas (LNG) runner-up Novatek is ready to supply LNG to state-owned gas giant Gazprom next winter, amid the uncertainty surrounding the future of Ukrainian gas transit deal, Interfax reported on July 2 citing the head of the company Leonid Mikhelson.
Production of liquefied natural gas (LNG) at Russia’s Yamal LNG plant reached 9mn tonnes in the first half of the year, the company said on Tuesday. Russia’s Novatek is the largest shareholder of Yamal LNG, controlling 50.1% in the project. France’s Total and China’s CNPC have 20% each, while the Silk Road Fund from China owns 9.9% in Yamal LNG.
Novatek asked the government to cut the interest rates for construction of its LNG tankers at the Zvezda shipyard using the sovereign National Welfare Fund (NWF), Kommersant daily reported on July 29 citing unpublished letter of Novatek's head and Russia's richest man Leonid Mikhelson to Prime Minister Dmitri Medvedev. Reportedly, Novatek suggested depositing $5bn from NWF on the accounts of state development bank Vnesheconombank (VEB.RF), which would then discount lease construction of 15 LNG tankers for Novatek's next LNG project Arctic LNG-2. Notably, Zvezda is controlled by the Rosneftegaz holding company, which holds state stakes in Gazprom and Rosneft, and headed by influential head of Rosneft Igor Sechin, who is also the CEO of the Rosneft oil company subsidiary.
The Russian government will allocate RUB103.6 billion rubles on construction of a RUB144.2 billion ruble independent gas producer Novatek’s Utrenny liquefied natural gas (LNG) terminal in the Yamalo-Nenets Autonomous District, the government said.
Novatek held a conference call on its 2Q19 IFRS results. The key highlights from the call are as follows.
• Novatek expects gas production to grow 8-10% YoY in 2019, with condensate production up just slightly.
• The capex guidance for this year was raised from RUB 185bn (USD 2.9bn) to RUB 200bn (USD 3.2bn) to reflect unplanned expenses for the new Obsky LNG plant.
• The Obsky LNG plant is to have three trains, with 1.6mnt of capacity each, and will be launched in line with the Arctic LNG 2 plant in 2022-23. The FID on the project is to be taken in 1H20. Novatek believes that it is too early to provide the total capex requirement.
• Future dividend payments are to be increased significantly after the final shipping completion test for Yamal somewhere in April 2020. Thus, the company might increase the dividend and take into account cash flows generation with the dividends as early as for 1H20. No changes in the official dividend policy (to pay at least 30% of IFRS net income) are needed.
• The company expects to receive more dividends from Arcticgas later this year.
• In the Arctic LNG project, the company is focusing on taking the FID in 3Q19.
98 RUSSIA Country Report August 2019 www.intellinews.com