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Arctic LNG 2 closer to FID with 10% stake sale

Latest deal done with Japanese consortium will see Novatek achieve its target of selling 40% of LNG scheme to foreign players

Russian independent Novatek has agreed a new deal that will see it achieve its aim of selling a 40% interest in its Arctic LNG 2 project in West Siberia to international companies.

Under the latest agreement confirmed early this week a consortium of Japan’s Mitsui and Japan Oil, Gas & Metals National Corporation (Jogmec) will buy a 10% shareholding in the liquefied natural gas project from Novatek.

France's Total, China National Petroleum Corporation and China National Offshore Oil Corporation have each already reached agreements covering the purchase of 10% stakes in Arctic LNG 2.

The Japanese pairing will also commit to purchase up to 2 million tonnes per annum of LNG from the project.

The transaction is expected to be closed in “near future” once necessary regulatory approvals are received, Novatek said.

The agreed schedule and amounts of payment for the shareholding were not disclosed.

However, Mitsui reiterated a Novatek estimate that the total development cost of Arctic LNG 2 will be in the range of between $21 billion and $23 billion.

Russian President Vladimir Putin, who witnessed the signing of the agreement in Osaka, Japan, this past weekend, said that Mitsui and Jogmec are set to invest almost $3 billion into Arctic LNG 2.

Novatek is expected to disclose details of the transaction in its quarterly financial report after the deal is closed.

The company earlier said that once it reaches its goal of selling a 40% interest in Arctic LNG 2, it plans to get all project shareholders to pass a final investment decision on the project before the end of this year.

Once the final investment decision is approved, Arctic LNG 2 will proceed with arranging financing for the project and awarding major construction contracts for gas liquefaction topsides to be placed on a concrete gravity-based structure (GBS) platform.

Three GBS units are set to be built near the Russian port of Murmansk and then towed to the shore of the Gydan Peninsula in the Yamal-Nenets region to support the three-train liquefaction facility, which will have total capacity of almost 20 million tpa of LNG.

Novatek executive board chairman Leonid Mikhelson has been quoted as saying that the company may consider selling another minority stake in Arctic LNG 2 if a buyer opens up new opportunities in logistics and marketing of LNG from the development.

However, that could trigger an option under which Total has the right to buy another 5% shareholding in Arctic LNG 2 if Novatek’s total stake in the project drops below 60%.

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