Novatek announces LNG supply agreement

Novatek today announced the conclusion of heads of agreement for the supply of liquefied natural gas (LNG) between Yamal LNG and China National Petroleum Corporation (CNPC). The document provides for the supply of no less than three million tpa of LNG at delivered ex-ship (DES) terms for a period of 15 years with possible supply extension. The LNG price is indexed to the Japanese Crude Cocktail.

Chairman of Novatek’s management board, Leonid V. Mikhelson, said: “We welcome the achievement of a mutually beneficial agreement on LNG supplies to the fast growing Chinese market”.

Yamal LNG project

The Yamal LNG project hopes to develop an LNG plant with an annual production capacity of 16.5 million tpa based on the feedstock resources of the South-Tambeyskoye field. According to the PRMS reserve standards, the proven and probable reserves of the South-Tambeyskoye field as of 31 December 2012 were appraised at 907 billion m3 of natural gas. The project also requires the construction of transport infrastructure including a sea-port and an airport located at Sabetta (north-east of the Yamal Peninsula).

The venture

Yamal LNG is a joint venture currently owned by OAO Novatek (80%) and Total S.A. (20%). On 5 September 2013 Novatek and CNPC concluded an agreement on the purchase of a 20% equity share in Yamal LNG by CNPC. The transfer of title to the equity share is subject to the receipt of necessary regulatory approvals and expected to be completed by 01 December 2013. Following completion of the deal, the shareholder structure of Yamal LNG will be as follows: OAO Novatek (60%), Total S.A. (20%) and CNPC (20%).

OAO Novatek is Russia’s largest independent gas producer and the second largest natural gas producer in Russia.

Adapted from press release by Ted Monroe

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