Russia's Yamal LNG to fully market LNG from project, take FID regardless of export rights
Paris (Platts)--22May2013/641 am EDT/1041 GMT
The Novatek-led Yamal LNG consortium's marketing of LNG from the
project and final investment decision are not dependent on whether the
Russian government would allow companies other than Gazprom to export gas
from the country, representatives from Yamal LNG and Total said Tuesday.
"It's important to understand that the question of export rights is not
an obstacle [to making the FID], because buyers have committed on the
understanding of our Gazprom Export agency agreement," Christophe Malet,
deputy director of marketing and shipping at Yamal LNG said on the sidelines
of the CIS Oil and Gas Summit in Paris Tuesday.
The agency agreement, which states that Gazprom Export will export LNG
from the project on the partners' behalf, was signed in 2010.
Novatek, which holds an 80% stake in the project, and Total, which has a
20% stake, are awaiting a firm decision from the Russian government on
whether it would allow independent producers to export LNG from the country.
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Currently, only state-owned Gazprom has the right to export gas,
including LNG. Expected deadlines to resolve the issue have come and gone and
there is little clarity on if and when the government will take a decision.
Malet said that the company is working on concluding marketing of the
project as soon as possible.
"As we speak, about 60% of the project is under serious commitment,
covered by heads of agreements or sale and purchase agreements," Malet said.
"There are a number of ongoing discussions for the remaining 40%, which
may lead to agreements in the next few weeks," Malet said, adding that the
project's focus is towards Asia.
Separately, a source close to the talks told journalists that four of
these potential deals were with European companies, including BP and EDF, and
four with Asian companies. Among the list of potential customers are some who
are interested in an equity stake in the project, Malet added.
"Those buyers looking to take an equity stake are more concerned [about
export liberalization] ... as the issue does have consequences for the
project's financing," Malet said.
In early February, Russian daily Izvestiya reported that a consortium
of banks organizing funding for Yamal LNG plans to seek only up to $5 billion
if the law is not changed, citing sources in the energy ministry. If the law
is amended, the consortium comprising France's Societe Generale, Russia's
Gazprombank and Sberbank plans to seek finance of up to $18 billion.
Novatek representatives had said previously that signing of offtake
contracts is conditional on liberalization of exports. Novatek CEO Leonid
Mikhelson said in March that future customers were ready to sign contracts
for around 80% of LNG from the project in the second quarter if the
government moved to liberalize exports. The company recently pushed this
deadline back by 2-3 months.
Gleb Luxemburg, general director of Yamal LNG, said at the conference
that liberalization of the LNG export market "is not the subject of the FID,
that's more technical."
Total's technical director of Exploration and Production for Continental
Europe and Central Asia Kevin Boyne added: "We believe that the technical
elements of the project are fully feasible."
Boyne conceded that the export of LNG is the most important issue to be
resolved, but is "not a dealbreaker."
Novatek representatives said earlier that a final investment decision
will be taken this year.
Boyne and Luxemburg added that the project partners' aim of launching
the project in late 2016 remains feasible.
"It's a challenging target ... but it's just about feasible and we're
still working towards it," Boyne said.
Luxemburg added that all contractors "have agreed to the deadline of
The second and third trains of the project are to be built over
2013-2017 and 2014-2018, respectively. Each train has a planned capacity of 5
million-5.5 million mt/year.
Yamal LNG is based on the resources of the South-Tambeiskoye field,
which includes proven and probable reserves of 907 billion cubic meters of
natural gas, as of December 31, 2012, under PRMS standards.
--Rosemary Griffin, firstname.lastname@example.org
--Edited by Geetha Narayanasamy, email@example.com