Oil and Gas

UPDATE 2-Russia's Novatek in long-term LNG deal with China's Shenergy

(adds Novatek’s statement)

SINGAPORE, Feb 25 (Reuters) - Russia’s top producer of liquefied natural gas (LNG), Novatek, said on Thursday it had signed a long-term deal to supply the super-chilled fuel to Chinese state-owned firm Shenergy Group Company.

Confirming a Reuters report earlier on Thursday, Novatek said its Gas & Power Asia unit would supply Shenergy more than 3 million tonnes of LNG over 15 years.

This would be about three LNG cargoes each year, one industry executive has said.

Shenerngy did not immediately comment.

Novatek said the supply would come from LNG produced from its Arctic LNG 2 project, a $21-billion project that got final investment approval in 2019 and is expected to launch in 2023.

Shenergy is the leading gas supplier to China’s financial hub of Shanghai, meeting 55% of its gas consumption in 2020, the Shanghai Petroleum and Natural Gas Exchange said this week.

Backed by the Shanghai municipal government, Shenergy was the first state-run firm outside China’s dominant state energy giants to own and run a receiving LNG terminal.

It signed a long-term LNG contract with Centrica Plc last year and has also signed a heads of agreement pact with Malaysia’s Petronas LNG.

Securing long-term supply deals for LNG from the project had been challenging amid volatile gas prices, Novatek’s Chief Financial Officer Mark Gyetvay told investors late last year.

During a colder than expected winter, spot Asian LNG prices LNG-AS spiked last month to a record high of $32.50 per million British thermal units (mmBtu), versus a record low below $2 per mmBtu last May, when coronavirus lockdowns hit Asian demand. (Reporting by Chen Aizhu and Jessica Jaganathan, additional reporting by Muyu Xu in Beijing. Editing by Clarence Fernandez and Mark Potter)