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major equipment for Arctic LNG-2. We assume T1 and T2 will launch on time, but T3 may be delayed until ‘27e. Obskiy LNG, to be built on Arctic Cascade, may see its FID next year and launches of 2.5mtpa T1 and T2 in ‘25e and ‘26e, respectfully.
Understanding why liquids are so important to this “gas” company
Although billed as a gas company, historically liquids have accounted for half of Novatek’s EBITDA. A surge in oil output around ‘15 is fading, but condensate production will remain a key profit generator indefinitely, supported by a strategy of targeting very wet gas in the Achimov and Jurassic formations. We show that, while condensate accounts for only c13% of wet gas hydrocarbons, it generates fully half of the revenue. Note liquids output has been stabilized with the launches of Evo-Yakhinsky (May ‘22) and North-Russkoye (2019).
Sensitivities: Oil price more important than spot gas prices or ruble
Novatek’s external earnings drivers can be ranked as follows: (1) oil prices, which not only determine the value of Novatek’s liquids production, but also of c75% of the gas sold by Yamal LNG; (2) European/Asian spot gas prices are less important, but the record-high European gas prices will boost Novatek’s P&L via Yamal LNG, as the 25% of gas sales are made vs hub-based prices; and (3) the Rb/$ exchange rate, where a stronger ruble has a quite modest but positive effect on Novatek’s earnings in USD terms.
9.2.2 Automotive corporate news
Chinese state-owned car producer Beijing Automotive Industry Holding Co. (BAIC) and Russian car producer Avtotor are in negotiations on assembly of Chinese cars in Kaliningrad, Vedomosti reports. A source told Vedomosti that the two companies are already at the stage of signing an agreement, and that BAIC was not the only Chinese car producer that was discussing assembly with Avtotor. The Russian carmaker is also in talks with the subsidiaries of Chery, the source said. The situation is complicated by a large cost of car components imports, as only sea transportation from China is possible now, which will cost around $3,000 per car kit. Moreover, it is unclear who will sell BAIC cars in Russia, as Russians are unaware of the brand, and a distributor will have to spend $6–8mn in advertising to sell up to 20,000 cars per year, a source told the business daily.
The Kaliningrad-based car producer lost all its main assembly partners in Russia gradually over the past several months, as BMW stopped exports to Russia and assembly in Kaliningrad in March while Hyundai and Kia stopped car assembly in October. In September, Avtotor founder Vladimir Shcherbakov said that the company will readjust production to start assembly of new brands in 2023. An Avtotor representative confirmed to Vedomosti that the company was preparing for the launch of production of new car brands and that it was working with several new partners, but refused to name the partners, the business daily said.
130 RUSSIA Country Report December 2022 www.intellinews.com