Russia’s Novatek says Arctic LNG 2 partners ink long-term offtake deals

Russia’s Novatek said on Wednesday it signed offtake deals with its partners in the Arctic LNG 2 project for all of the volumes from the development.

The project located on the Gydan peninsula includes the construction of three LNG trains with a capacity of 6.6 mtpa, each, using gravity-based structure platforms.

Novatek said in a statement the Arctic LNG 2 partners signed 20-year sales and purchase agreements for the total LNG production volumes.

The Russian producer is the LNG project’s operator with a 60 percent stake, France’s Total 10 owns percent while CNPC and CNOOC of China have 10 percent, each.

Japan Arctic LNG, a consortium of Mitsui & Co and Jogmec owns a 10 percent stake in the project as well.

The new deals provide for supplies from Arctic LNG 2 on a free on board (FOB) basis at transshipment terminals in Murmansk and Kamchatka with pricing formulas linked to international oil and gas benchmarks, Novatek said.

In addition, the LNG offtake volumes are set in proportion to the respective participants’ ownership stakes in the project, it said.

“The long-term offtake agreements between Arctic LNG 2 and its participants ensure the future revenue stream from LNG sales and de-risks the project,” Novatek’s chief executive and Russian billionaire Leonid Mikhelson, said.

“This represents one of the most important milestones in attracting the project’s external financing that will be completed in 2021,” he said.

Novatek previously said the project’s partners were working to complete about $11 billion in external financing for the project that will cost around $21.3 billion in total.

The firm expects to launch the first LNG train in 2023, with trains 2 and 3 to follow in 2024 and 2026, respectively.

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