Russian gas producer Novatek has signed two deals to sell a combined 20% interest in $25.5bn Arctic LNG 2 project in Russia, to two state-owned Chinese energy firms.


Image: Novatek to sell stake in Arctic LNG 2 project to Chinese firms. Photo: Image by rawpixel from Pixabay.

Located in the Gydan Peninsula in the northern part of Siberia, the Arctic LNG 2 Project involves the development and production of Utrenneye gas field and the construction and operation of three LNG trains each with capacity of 6.6 million tons per annum.

As part of the deals, Novatek will sell 10% stake in the Arctic LNG 2 project to China National Oil and Gas Exploration and Development Corporation (CNODC) and a further 10% interest to China National Offshore Oil Corporation (CNOOC).

CNODC is a wholly owned subsidiary of China National Petroleum Corporation (CNPC). Financial terms of the deals were undisclosed.

Novatek management board chairman Leonid Mikhelson said: “We are very glad that CNOOC has joined our Arctic LNG 2 project as our new partner, since China represents one of the key consuming markets for our LNG sales.

“Arctic LNG 2 will be a game-changer in the global gas market, and our proven track record to successfully build an LNG facility in the Arctic zone, combined with a proven logistical model with access to prospective markets and large hydrocarbon resource base will ensure the successful implementation of this world class project.”

The project, which is expected to have a production capacity of 19.8 million tons (Mt) of LNG per year, aims to develop seven billion barrels of oil-equivalent from the Utrenneye field. It is scheduled to be commissioned in 2023.

The deal with CNOOC is subject to the completion of due diligence, signing of the sales and purchase agreement. It also requires approval from the company’s board of directors as well as necessary permits from Chinese and Russian authorities.

In March 2019, Novatek signed an agreement to divest 10% stake in the Arctic LNG 2 project to Total for an undisclosed price.

With the deal, the French oil and gas giant increased its overall economic interest in the Arctic LNG 2 project to around 21.6%, as it already holds a stake of 19.4% in Novatek.