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the project financing for Arctic LNG-2 was expected and accounted for in our model, we still consider it a fairly positive development. The $11bn in credit lines are expected to be fully available for the project by the end of 2Q21. Instead of signing long-term LNG off-take agreements, the project shareholders seem to be giving certain guarantees to the banks, including with regard to debt servicing, liquidity preservation and capex commitments.
Novatek has signed a heads of agreement with Total for the sale of a 10% interest in Arctic Transshipment, the future operator of the Kamchatka and Murmansk LNG transshipment complexes, which are currently under construction. The company has long been in negotiations with its Arctic LNG-2 partners to enter the planned transshipment complexes in Murmansk and Kamchatka. As the partners will be receiving LNG at FOB Murmansk and Kamchatka, we consider it reasonable that they participate in building the transshipment infrastructure. Total capex is estimated at R70 bln for each complex (excluding the part the state has promised to finance), based on comments of Novatek's CEO made last year. Presumably, Total will bear 10% of the costs. Other partners in Arctic LNG-2 are likely to join the transshipment projects as well, in our view.
Novatek won two new fields on the Yamal Peninsula. Interfax reported. Novatek won the fields after receiving the backing of President Putin. The Neitinskoye and Arkticheskoye fields on the Yamal Peninsula between them have an estimated 413bcm of C1+C2 gas reserves. The license terms for the fields require them to be used for LNG, and indeed Novatek wants them to provide a larger resource base for its 2.5mtpa Obskiy LNG project, which currently has a more modest 365bcm of C1+C2 reserves in two other fields. Additionally, the two new fields may support L-T operations at the company’s key Yamal LNG project.
Novatek reported its 1Q21 operating results on 12 April. Natural gas production was up 5.6% y/y to 20.2bcm and liquids production was up 2.7% y/y to 3.1mnt. Natural gas sales were up 7.2% y/y to 19.6bcm but LNG sales were down 23.7% y/y to 1.9bcm, as the company sold less LNG on the spot market and sold more gas under long-term contracts.
Novatek has bid for Gazprom’s supergiant, 7.3tcm Tambey group of fields. According to Kommersant’s sources, the proposed sale was the subject for a meeting between Novatek CEO Mikhelson and Gazprom CEO Miller reported to have happened late last week. Unlikely to succeed, but Novatek still thinking big. This is the second time Novatek has sought to get these fields with Gazprom having seen off the first attempt in 2017. Per Kommersant’s sources, the latest meeting came after CEO Mikhelson convinced President Putin that, strategically speaking, the fields’ best use for Russia would be for the production and export of LNG rather than a source of pipeline gas sometime after 2035. We think Novatek is unlikely to succeed in this bid, but the effort shows that the company is still thinking very big. Located on the
159 RUSSIA Country Report May 2021 www.intellinews.com