Novatek plans to raise $11 billion for second Arctic LNG project from Russian, Asian banks

That's on top of $10 billion from the projects stakeholders.

By Thomas Nilsen, The Independent Barents Observer - April 2, 2021
Many of the same banks which financed Yamal LNG will now finance the Arctic LNG 2 plant. (Atle Staalesen / The Independent Barents Observer)

Russian gas company Novatek’s Arctic LNG 2 project aims to raise $11 billion in financing in a 50/50 split between domestic and Asian banks, on top of $10 billion to be raised by the shareholders in the project, the business daily Kommersant reports, bringing the project’s total costs up to $21.3 billion.

The pool of banks reportedly ready to provide loans for 51.6 percent of the total costs of Novatek’s second Arctic liquefied natural gas plant includes many of the same that financed the company’s first plant, on the Yamal Peninsula.

The Russian banks VEB.RF, Sberbank and Gazprombank will cover half and a pool of foreign banks, consisting of China Development Bank (CDB), the Export-Import Bank of China, the Bank of Japan for International Cooperation (JBIC), Intesa Sanpaolo and Raiffeisen Bank International will cover the other half, according to Kommersant.

Earlier in March, Novatek CEO Leonid Mikhelson told state-affiliated news agency TASS investments to implement Arctic LNG 2 was not negatively affected by the pandemic.

The first of three trains for LNG production is scheduled to be launched in 2023, the second in 2024 and the third in 2026.

Six module-based units for LNG production are currently under construction at the Wison Offshore & Marine’s Zhoushan yard in China.

Other huge constructions for the plant, including assembling and installation of topside modules, will take place at Belokamenka north of Murmansk where Novatek now is building the Kola yard with two huge dry-docks and other facilities to serve the company’s Arctic development projects.

According to a recent Russian government program aimed to boost LNG production in the country’s Arctic regions, the goal is to deliver 140 million tons by 2035, almost five times more compared with the 2020 production.

More than 90 percent of Russia’s natural gas resources are in the Yamal-Nenets region where Novatek has its current production facility at Sabetta.

The resource base for Arctic LNG 2 is the Utrennye field, located off the coast of the Gydan Peninsula, some 70 kilometers across the Ob Bay from Sabetta.

Each of the three LNG trains in the Arctic LNG 2 project will have an annual production capacity of 6.6 million tons.

Novatek, which is Russia’s largest private natural gas company, holds 60 percent of the interest in Arctic LNG 2, while Total has 10 percent, China National Offshore Oil Corporation (CNOOC) 10 percent, China National Petroleum Corporation (CNPC) 10 percent, and the last 10 percent is held by a consortium of Mitsui and Jogmec.