China’s Zhejiang Energy to buy stake in Russia’s Yakutia LNG project

China’s Zhejiang Energy has signed a preliminary deal to take a stake and purchase volumes from A-Property’s planned Yakutia LNG export project in Russia.

According to a statement by A-Property, Zhejiang Energy would buy a 10 percent stake in its two companies developing the Yakutia LNG project on Russia’s far east coast.

These include gas and condensate producer Yatek and Globaltek. The latter is developing the technical solutions and the LNG plant that would use fuel from Yatek’s fields, A-Property said.

Moscow-based A-Property, led by Russian businessman Albert Avdolyan, said the project could be worth about 5 billion euros ($5.7 billion), meaning that Zhejiang Energy would spend about 500 million euros on the stake.

A-Property expects the deal with Zhejiang Energy to close in October 2022 while the first LNG from the project could depart the planned plant in 2027.

China offtake deal

Besides buying a stake, A-Property said that Zhejiang Energy would also purchase LNG and deliver it to the Chinese market, but it did not disclose additional information.

The firm said that the project could produce up to 18 million tonnes per year. Based on this, Zhejiang Energy would buy about 1.8 million tonnes per year from the project.

A-Property would probably develop the project in stages.

Furthermore, A-Property said that the project involves building a 1358 kilometers long pipeline that would connect Yatek’s fields in Yakutia to the 18 mtpa LNG plant near Ayan on the Sea of ​​Okhotsk.

The firm said it expects Yatek’s gas reserves to rise to 567 billion cubic meters in the third quarter of 2022.

These reserves could rise to as much as 1 trillion cubic meters by 2025, which would be sufficient to support the implementation of the LNG project, it said.

A-Property did not reveal any additional information regarding the project.

FEED contract

Reuters reported back in 2020 that the firm had hired TechnipFMC, now Technip Energies, to complete a pre-FEED study for the project.

Russia’s business newspaper Vedomosti reported this week that A-Property had shortlisted three firms to win the project’s FEED contract after launching a tender last year.

The firms include Technip Energies, McDermott, and JGC in consortium with Aker Solutions, Vedomosti said, citing an unidentified source.

According to the report, A-Property would announce the winner in February this year.

Vedomosti also said that the firm has yet to secure the right to export LNG. Currently, only Gazprom, Novatek, and Rosneft have a license to ship LNG, it said.

Previous reports also suggested that the Yakutia LNG project could use gravity-based structure platforms, such as those used for Novatek’s Arctic LNG 2 project.

Another Russian LNG deal for Zhejiang Energy

This deal with A-Property is not the first LNG contract Zhejiang Energy signed with Russian firms.

Russian independent LNG producer Novatek recently finalized a deal with Zhejiang Energy to supply the Chinese firm with liquefied natural gas from its Arctic LNG 2 project.

The SPA followed the heads of agreement the duo signed in June last year.

Under the deal, Novatek’s gas and power unit will deliver 1 million tons of LNG on a DES basis for a period of 15 years to Zhejiang Energy’s LNG terminals in China.

Zhejiang Energy is a unit of the Zhejiang Provincial Energy Group.

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