Russia’s energy giant Novatek said on Wednesday it has inked 20-year agreements with the shareholders of its Arctic LNG 2 project on the sale and purchase of the entire volume of liquified natural gas.
The LNG sales from the plant’s first liquefaction train are planned to commence in 2023, according to the company.
The agreements “provide for LNG supplies from Arctic LNG 2 on FOB Murmansk and FOB Kamchatka basis with pricing formulas linked to international oil and gas benchmarks. The LNG offtake volumes are set in proportion to the respective participants’ ownership stakes in the project,” Novatek said.
The company’s chairman of the management board, Leonid Mikhelson, said that “The long-term offtake agreements between Arctic LNG 2 and its participants ensure the future revenue stream from LNG sales and de-risks the project. This represents one of the most important milestones in attracting the project’s external financing that will be completed in 2021.”
Mikhelson said earlier that the Arctic LNG 2 plant is 39% complete and will be launched as planned.
Arctic LNG 2 envisages constructing three LNG liquefaction trains of 6.6 million tons per annum each, as well as cumulative gas condensate production capacity of 1.6 million tons per annum. The total LNG capacity of the three liquefaction trains will be 19.8 million tons. The first train of Arctic LNG 2 is 53% ready and is scheduled to start operations in two years.
Novatek owns the majority stake (60%) in the project, with minority stakes held by foreign companies. The list of foreign investors includes French oil and gas company Total (10%), Chinese firms CNPC (10%) and CNOOC (10%), and the Japanese consortium of Mitsui and JOGMEC (10%).
The project utilizes an innovative construction concept using gravity-based structure platforms to reduce overall capital cost and minimize the project’s environmental footprint in the Arctic zone of Russia, according to Novatek.
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