Page 107 - RusRPTApr19

daily also noted that Sberbank is likely to be involved in the Novatek's second LNG project, with a credit line for undisclosed amount against the collateral of 15% in Arctic LNG-2 reportedly opened in Russia's largest bank. Other foreign companies that have been eyeing participation in Arctic LNG-2 are China’s energy company CNPC, Saudi Aramco, Japanese Mitsui and Mitsubishi, Korean Kogas, and others. The total cost of the project was previously estimated by Novatek at $45bn, with $21-25bn of financing to be raised. Novatek said on February 20 its net profit in 2018 rose by 4.7% to RUB163.7bn ($2.5bn) thanks to the start of LNG production. Excluding the effect of foreign exchange differences, as well as the one-time effect from the disposal of interests in joint ventures, profit jumped by 49% to RUB232.9bn.
Russian independent gas producer Novatek is pursuing the construction of the Arctic LNG-2 plant, which will process gas from the Utrenniy field, which contains some 2 trillion cubic meters of gas. For scale, Ukraine consumed 32 billion cubic meters in 2017 – the field is huge. And because of that, the field is considered a strategic asset by Russia, which means there are significant regulatory hurdles for foreigners looking to participate. Enter French Total, which wanted a 10% stake in the project (and a 5% option), on top of owning 19.4% of NOVATEK directly. A direct purchase would have bumped Total’s total, so to speak, ownership of the field above 25%, triggering a potentially months-long review by the Federal Anti-monopoly Service and Legal Commission on Foreign Investment. A regulatory headache, to say the very least. So what did NOVATEK do? It used those same shares essentially as collateral for financing from Sberbank. As under Russian law, Sberbank technically controls these shares, Total’s participation will not cause a regulatory review.
● Lukoil
Russian oil company Lukoil is planning to expand in Azerbaijan, the company’s CEO Vagit Alekperov said on March 18, Trend reported. Specifically, Alekperov said the company was interested in participating in projects such as Umid-Babek and Absheron in Azerbaijan. Speaking on the side-lines of the OPEC/non-OPEC Joint Ministerial Monitoring Committee (JMMC) meeting in Baku, Alekperov said that all investment conditions are present in the region. The Abershon field is currently being developed by Azerbaijan’s state oil company Socar and France’s Total under a framework agreement signed in 2016. The field has estimated reserves of 326bn cubic metres (cm) of gas and 108 million tonnes of condensate, Total has estimated. Lukoil was previously reported to be in talks with Socar to join the offshore Umid-Babek oil and gas project, where it is working alongside Norway’s Nobel but has been seeking new partners, FSU OGM Monitor reported in mid 2018. According to Nobel, the field contains an estimated 600bn cm of gas and 800mn barrels of condensate. Other potential partners are understood to include Total and Statoil.
Russia's second-largest oil producer and largest independent oil company Lukoil has spent $1.639bn on its share buyback programme so far, acquiring 2.87% of its shares, the company said on March 12. Lukoil posted strong profit and cash flow in the fourth quarter of 2018. The analysts saw the continuation of the buyback programme, as well as the dividend and production outlook as the main catalysts for the name going forward. The company launched the first stage of its $3bn share buyback running through the end of 2022 in September 2018. In the first stage, the company said it would acquire at least $1bn worth of its shares by the end of 2019. Lukoil has
107 RUSSIA Country Report April 2019 www.intellinews.com