Page 126 - RusRPTOct21

Low payment to reserves multiple. The combined reserves of the new fields are 413bcm of natural gas and 28mnt of liquids (a total of 2.9bnoe) under the Russian reserve classification. The majority of the reserves come from the Arkticheskoye field (276bcm C1, 39bcm C2 gas reserves). Thus, the acquired reserves cost the company USD 0.06/boe, which is in line with recent reserves multiples for the acquisition of gas licences by Russian companies (e.g. USD 0.04/boe paidy Gazprom for East-Bovanenkovo in 2021). The recent run-up in export gas prices does not seem to have influenced the cost of reserve additions for Novatek.
10bcm gas production possible at peak. The question now is what Novatek decides to do with these licences. Previously, the company suggested that these fields might be used as resources for the 5mnt/a Obsky LNG project, to supplement the reserves of Yamal LNG and to gasify the Kamchatka region. However, the company relinquished its Obsky LNG project in favour of the prospective Obsky Gas Chemical Complex, an up to 5mnt/a ammonia facility. We estimate that the combined production of the two fields with 0.4tcm reserves (if launched simultaneously) could be 10bcm of gas at the peak. Obsky GCC also holds licences for the Verkhneteuteiskoyeу and Zapadno-Seyakhinskoye fields, with a combined 365bcm С1+С2 gas reserves. If Arkticheskoye and Neitinskoye are indeed added to Obsky GCC's existing licences, total reserves would be enough to produce up to 20bcm at the peak. The company itself commented that the assets could be used for LNG projects,ut has refrained from offering any details. Overall, we consider the sizable appreciation of reservesase as supportive for Novatek, especially in light of potential ESG related projects, including hydrogen and ammonia production.
● Lukoil
Russia's Ministry of Natural Resources has submitted draft orders to allocate five offshore areas for geological exploration to Lukoil and the privately held Yamal Shelf Company. Lukoil, Russia's second-largest oil producer and largest independent company, is set to receive the Nadezhdalock in thealtic Sea, while the other company will be concentrating in the gas-prone Ob andaidaratskyays of the Kara Sea, according to Kommersant daily. The decision is notable, as previously only state-controlled gas and oil majors Gazprom and Rosneft and their subsidiaries and joint ventures could extract on offshore. Lukoil haseen deprived of offshore extraction despite significant expertise in extraction in overseas territories.
Lukoil is considering CO2 capture but does not have commercialisation solutions yet, its first VP Azat Shamsuarov has said. The company already captures CO2 at its GPP for use as an additive to its products, and might consider a CO2 capture project at its Perm refinery. However, it is not clear for
126 RUSSIA Country Report October 2021 www.intellinews.com