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situation in the Far East district. However, to ensure adequate returns on the project the government will need to provide both large, tailored tax breaks and guarantee a stable tax regime for an extended period of time, per unnamed Rosneft sources.
● Novatek
Russia’s $21bn Arctic LNG-2 export project is reportedly set to get $9.5bn in financing from international banks, with additional funding expected to come from domestic lenders. Russian gas firm Novatek and its partners took a final investment decision (FID) on the project a year ago, and construction is well underway. The terminal’s three trains are due to go online in 2023, 2024 and 2026, bringing its output to 19.8mn tonnes per year (tpy). The lender expected to offer the largest credit facility, $5bn, is China Development Bank (CDB), according to a document seen by Reuters. The Japan Bank for International Cooperation (JBIC) is set to provide a $2.5bn facility, while France’s Bpifrance is anticipated to allocate $700mn in credit finance.
Sberbank is ready to finance Novatek’s Arctic LNG-2 project, Interfax reports, citing Sberbank’s Deputy Chairman of the Executive Board Anatoly Popov. According to Popov, the bank’s financing for the project might exceed the EUR 2.7bn provided to Yamal LNG. The decision is planned to be reached by YE20. Novatek has recently announced that it has moved the signing of the project financing for Arctic LNG-2 to 2021. At the same time, around 23% of the project’s capital programme (guided at USD 20-21bn) has been already financed by the shareholders. Although the steep drop in spot LNG prices and lack of interest among LNG buyers for long-term contracts might provide some obstacles for securing project financing, the support from Sberbank or other Russian banks would be helpful for the project. Novatek previously planned to attract USD 9-11bn in project’s financing for Arctic LNG-2 (around 50% of total capex).
● Lukoil
Russia's second-largest oil producer and largest independent oil producer Lukoil held a conference call upon the publication of its 2Q20 IFRS results, in which the management signalled an expected recovery of output following the OPEC+ cuts applied in May-June, issues with gas production and exports in Uzbekistan, and it reiterated its capex target for this year. As reported by bne IntelliNews, Lukoil has shown mixed results in 2Q20, that have caused the analysts to focus on short-term risks to its dividend outlook. Notably, Lukoil was forced to reduce gas production at its Gissar field projects in Uzbekistan by 28% in 1Q20 and by 69% in 2Q20 versus the 4Q19 level due to the decline in Chinese demand and falling liquefied natural gas (LNG) gas prices. "China has recommenced gas purchases from Uzbekistan,
142 RUSSIA Country Report October 2020 www.intellinews.com
