Page 116 - RusRPTJun19

has Buy recommendation on Rosneft's shares at a target price of $9 per GDR. ● Novatek
Novatek, Russia's second-largest natural gas producer with ambitious liquefied natural gas (LNG) growth programme, advanced further with its Arctic LNG-2 plant by signing a contract with UK-based TechnipFMC for engineering, procurement, supply, construction and commissioning. As reported by bne IntelliNews, in 1Q19 Novatek cashed in on its second LNG project, Arctic LNG-2, in the reporting quarter, selling stakes to its French strategic partner Total and Chinese energy majors. The TechnipFMC "development is positive for sentiment, as it marks an important step toward the realization of the Arctic LNG-2 project and indicates that the preliminary work is so far progressing on schedule," Sberbank CIB commented on May 21, stressing that the contract firmly specifies a 2023 launch date for the first LNG train The contract signed "essentially secures the execution of the project and should provide greater certainty that the project will meet the capex target," Sberbank believes, noting that "the fact that the contract was signed ahead of the FID [final investment decision] is also a particularly encouraging sign." Technip has already perfomed engineering and construction work for the Yamal LNG project as the lead in a consortium with Japan's JGC and Chiyoda Corp. Novatek launched its first major LNG project Yamal in 2017 despite Western sanctions against one of the company’s prominent shareholders and influential Kremlin insider and stoligarch Gennady Timchenko. To avoid trouble Timchenko subsequently reduced his share in the company, but remains a big minority shareholder. The company has adopted an ambitious strategy for LNG growth through 2030 and is now lining up a tanker transportation strategy to back it up.
Novatek, Russia's second-largest gas company with ambitious liquefied natural gas (LNG) strategy, plans to launch its third LNG plant Obskiy LNG in 4Q22, Interfax reported on May 21 citing the CEO of the plant Vladimir Khurtin. This month Novatek has cemented the progress on its second LNG plant Arctic LNG-2 with a number of equity deals, long-term supply contracts with traders, and signing a deal with an engineering and construction contractor. The announcement of the early launch of Obskiy is positive, "as the market does not consider it a part of Novatek’s market cap," BCS Global Markets commented on May 22. Obskiy LNG, to be located in the vicinity of Sabetta port on the Arctic Yamal peninsula, is expected to consist of 3 trains with 1.6mn metric tonnes capacity each, with the first line may be launched in 4Q22, the 2nd in 2Q23 and the 3rd in 3Q23. Novatek has not yet disclosed the cost of this plant, but, according to experts, it may be about $6bn, BCS GM estimates, reminding that Obskiy will be constructed simultaneously with Arctic LNG 2.
After 18 months of negotiations Saudi Aramco has reportedly pulled out of negotiations to buy a share in the liquefied natural gas project Arctic LNG-2 of Russia's second-largest gas producer Novatek, Vedomosti daily reported on May 23 citing unnamed sources close to the deal. "The deal is no longer because Novatek gave the stake to China," the sources said. Saudi Aramco was also reportedly not satisfied with the deal's conditions and concerned over sanction risks. In April Novatek sold 20% in its second LNG project Arctic LNG-2 to Chinese CNOOC and CNODC, with 10% stake sold to each. The Russian company has already closed the deal to sell a 10% stake in its French strategic partner energy major Total. Arctic LNG 2 is Novatek’s second LNG project with the capacity of 19.8mn tonnes. It is scheduled for
116 RUSSIA Country Report June 2019 www.intellinews.com