Russia’s Yamal LNG project on track, says Novatek
September 05 2016 10:55 PM
Mikhelson: Confident.


Russia’s Yamal LNG project, to build the country’s second gas liquefaction plant, is on track and on budget with Novatek and its partners having invested $18.5bn so far, Novatek’s CEO said.
The first phase of the project, in which Novatek is in partnership with France’s Total and China’s CNPC and the Silk Road Fund, is due to start operation some time next year and Novatek’s chief executive said it was 76% ready.
Russia is the world’s biggest producer of conventional gas after the United States but wants to increase its production of liquefied natural gas (LNG), which currently accounts for less than 5% of world output.
Investment in the Yamal project, which will require $27bn in total, was at risk after Novatek came under Western sanctions over Moscow’s role in the Ukraine crisis, but the project has since secured funding from Chinese and Russian banks, as well from the Russian government.
“To date, we have resolved all issues related to Yamal LNG’s financing,” Leonid Mikhelson, Novatek’s chief executive and a major shareholder, told reporters in comments cleared for publication yesterday. “In my opinion, we should implement similar projects on our own, not using (Russia state) budget financing in the future.”
The Yamal facility will have three production lines when it is completed, each with an annual capacity of 5.5mn tonnes of LNG.
In April, Yamal LNG signed loan deals with Chinese banks worth over $12bn.
It also secured Russian state funds worth 150bn roubles ($2.3bn) from a rainy day fund and €3.6bn ($4bn) from state-controlled Russian lenders Sberbank and Gazprombank.
Russia currently operates just one LNG plant, on the Pacific Island of Sakhalin, led by Gazprom, with an annual capacity of around 10mn tonnes.
Sakhalin-2 plans to expand to add a third production line with 5mn tonnes of annual capacity some time in the future.
The United States, Qatar and Australia, however, are also all expanding LNG production.
Novatek, Russia’s second biggest producer of conventional gas, plans to commission its second LNG project, Arctic LNG-2, by 2025 with planned LNG production of up to 16.5mn tonnes a year.

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