Russia's Novatek says deal with Germany's EnBW to ease LNG sales

Thu Sep 20, 2012 11:43am EDT

* Novatek to start LNG production later this decade

* It secured gas trading deal in July with Germany's EnBW

NOYABRSK, Russia, Sept 20 (Reuters) - A deal Novatek secured in July, to supply gas bought in Europe to a German utility, will let the Russian producer build up a market in advance for the liquefied natural gas (LNG) it plans to start producing from 2016, its chief executive said.

Novatek, Russia's largest non-state-owned natural gas producer, reached the agreement to provide 2 billion cubic metres of bought gas a year to Germany's EnBW in what it described as a trading operation.

The company is barred by law from exporting Russian gas - a right enjoyed by the larger state-controlled gas export monopoly Gazprom - so it is seeking other ways to enter foreign markets.

Novatek's CEO Leonid Mikhelson said on Thursday that the EnBW deal will help the company to shape its client base for future LNG sales.

"We expect from the trading (deal) that we would create a market for us for future LNG production," he told reporters in the northern town of Noyabrsk, where Russia's top petrochemical company Sibur, controlled by Mikhelson, launched production of liquefied petroleum gas products.

Novatek has ambitious plans to start LNG production in the Arctic peninsula of Yamal starting from 2016 in partnership with France's Total in what would be Russia's second LNG production enterprise.

Russia's only LNG output so far - 10 million tonnes a year - is in the Pacific island of Sakhalin and is operated by Gazprom.

The LNG from Yamal would be sold abroad with Gazprom facilitating customs clearance and acting as an export agent.

Mikhelson confirmed that gas supplies to the German utility would start on Oct.1 but declined to comment further on the agreement, saying that any details would "damage the deal." (Reporting by Olesya Astakhova; Writing by Vladimir Soldatkin; Editing by Anthony Barker)