Total has signed a definitive agreement to acquire a 10% direct stake in the $21bn Arctic LNG 2 project in Russia from Novatek for an undisclosed price.
The French oil and gas giant’s overall economic interest in the Arctic LNG 2 project will be around 21.6% given that it holds a stake of 19.4% in Novatek, which plans to retain a stake of 60% in the LNG project.
If Novatek brings down its stake under 60%, it will give Total the scope to increase its direct share in the Russian LNG project up to 15%.
A final investment decision (FID) on the Arctic LNG 2 project is likely to be made in the second half of this year, with plans to launch production from the first liquefaction train in 2023.
The LNG project, to be built in the Gydan Peninsula in northern Siberia, will have a production capacity of 19.8 million tons per year (Mt/y) through three liquefaction trains.
Each of the LNG trains, which will use gravity-based structure (GBS) platforms, will have a capacity of 6.6 Mt/y.
The Arctic LNG 2 project will utilize the more than seven billion boe of resources estimated to be contained in the Utrenneye onshore gas and condensate field.
The LNG produced from the project will be exported to global markets through a fleet of ice-class LNG carriers, which will take the Northern Sea Route. A transshipment terminal in Kamchatka will be used for cargoes headed for Asia while a terminal located near Murmansk will be used for cargoes intended for Europe.
Novatek and Total also signed an agreement under which the latter will have the scope to acquire 10-15% direct interest in all the future LNG projects of the Russian natural gas producer on the Yamal and Gydan peninsulas.
Total chairman and CEO Patrick Pouyanné said: “We are delighted to have concluded the definitive agreements for our entry into this new world class LNG project based on the vast Russian gas resources alongside our partner Novatek. Arctic LNG 2 builds on the success of Yamal LNG and will introduce several innovative solutions to further increase competitiveness.
“Arctic LNG 2 fits into our strategy of growing our LNG portfolio through competitive developments based on giant low cost resources primarily destined for the fast growing Asian markets.”
Novatek revealed that deal will include a payment by Total for the 10% stake along with financing for the project through the capital of Arctic LNG 2.
Novatek management board chairman Leonid Mikhelson said: “We have worked closely with TOTAL for many years and have built a good working relationship based on mutual trust and respect. We are pleased to further develop our successful cooperation with them on our new Arctic LNG 2 project.”
Last December 2018, Saipem and Renaissance were given a €2.2bn onshore engineering and construction contract for the Arctic LNG 2 project. Earlier this month, Siemens won a contract to supply compressor equipment for the three liquefaction trains.