April 25, 2019 / 2:37 PM / 2 months ago

Russia's Novatek to sell 20 percent in Arctic LNG 2 to China

MOSCOW (Reuters) - Two Chinese companies signed agreements with Russia’s Novatek on Thursday to buy a combined 20 percent stake in its new liquefied natural gas project, Arctic LNG 2.

FILE PHOTO: The logo of Russian gas producer Novatek is seen on a board during the St. Petersburg International Economic Forum 2017 (SPIEF 2017) June 1, 2017. REUTERS/Sergei Karpukhin/File Photo

Novatek gave no financial details in a statement announcing the agreements.

Russia, one of the world’s top gas producers, aims to be a major player in LNG and to export as much as Qatar, one of the global leaders in the market. So far, Russia has two LNG plants in operation: Gazprom-led Sakhalin-2 in its far east region and Novatek’s Yamal LNG, on the Arctic Yamal peninsula.

This week, Novatek officially launched its second LNG plant in the Baltic Sea port of Vysotsk but of a much smaller scale than Yamal LNG, Sakhalin 2 or planned Arctic LNG 2.

The Arctic LNG 2 deals were for China National Oil and Gas Exploration and Development Company (CNODC) and CNOOC to buy a 10 percent stake each in the project set to become Novatek’s third LNG plant in Russia. CNODC is a subsidiary of China National Petroleum Corporation (CNPC).

“China represents one of the key consuming markets for our LNG sales,” Novatek’s CEO Leonid Mikhelson said in a statement. “Arctic LNG 2 will be a game changer in the global gas market.”

Earlier this year, France’s Total, already a shareholder in Novatek itself and its Yamal LNG project, bought a 10 percent stake in Arctic LNG 2 project.

Sources told Reuters last December that Mitsui, Saudi Aramco and the Russian Direct Investment Fund were in talks with Novatek over taking stakes in the project, which should bring the Russian gas company closer to its goal of producing as much LNG as Qatar.

Novatek plans to start producing LNG at Arctic LNG 2 in 2022-2023. The plant, which is expected to cost around $25.5 billion, will have an annual production capacity of 19.8 million tonnes. Novatek plans to keep a 60 percent stake in the project.

Novatek also said on Thursday that its first quarter net profit, excluding a gain from the sale of the stake in Arctic LNG 2 to Total and other factors, was up 40 percent to 65.7 billion rubles ($1 billion) from the same period a year earlier.

Revenue was up by a third to 234 billion rubles, while normalized earnings before interest, tax, depreciation and amortization (EBITDA) increased by 55 percent to almost 118 billion rubles.

“The increases... were largely due to the production launch at the second and third LNG trains at Yamal LNG in the second half of 2018, as well as increases in our sales volumes and net realized prices in Russian rubles terms,” Novatek said.

Reporting by Maria Kiselyova; Writing by Maxim Rodionov and Katya Golubkova; Editing by Mark Potter and Emelia Sithole-Matarise

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