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Japanese Consortium Joins Arctic LNG 2

Japanese companies Mitsui and Japan Oil, Gas and Metals National Corporation (JOGMEC) have decided to join the Russian Arctic LNG 2 project. 

On June 29, the abovementioned Japanese consortium signed a sales and purchase agreement with Russian gas producer Novatek for a 10% participation interest in the Arctic LNG 2 project.

The participation in the project also provides for the long-term LNG offtake of approximately two million tons per annum by the Japanese partners.

Mitsui and JOGMEC’s purchase of the 10% stake via a joint venture was announced in the presence of Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe at the G20 meeting in Osaka. President Putin said Japanese investments in the project would total almost USD 3 billion. Mitsui will have a 25% share of the stake, and JOGMEC 75%, according to Wood Mackenzie.

The transaction, subject to regulatory approvals, is expected to be completed in the nearest future.

“We welcome the consortium of Mitsui and JOGMEC as partners in our Arctic LNG 2 project,” Leonid Mikhelson, NOVATEK’s Chairman of the Management Board, commented.

“Japan has 50 years of experience with importing LNG and is one of the largest LNG consuming countries. Moreover, Japanese companies have extensive experience in implementing LNG projects as well as marketing LNG around the world. The entry of Japanese partners into Arctic LNG 2 will contribute to its successful implementation,” he added.

Although there are no concrete plans at the moment, Japanese company Mitsubishi is allegedly interested in joining the newly-created joint venture as well, WoodMac revealed.

 “Mitsui will undoubtedly be responsible for marketing of the 1.98 mmtpa of equity LNG from the 10% stake,” Nicholas Browne, director, Asia Pacific Gas & LNG research at Wood Mackenzie, said.

“Mitsui will look to sell some of the volumes within Japan. However, it may also look to trade and sell Arctic-2 volumes into the Atlantic basin. The strong backing of JOGMEC highlights that this is seen as a strategic investment by the Japanese government,” Browne continued.

The Arctic LNG 2 project envisages constructing three LNG trains at 6.6 million tons per annum each, using gravity-based structure (GBS) platforms. The project is based on the hydrocarbon resources of the Utrenneye field.

Front-end engineering and design was completed last year, confirming preliminary cost estimates of between USD 20 billion and USD 21 billion. NOVATEK is believed to be targeting FID this month or next, with the start-up of the first train scheduled for 2022-2023.

Earlier this year, French oil and gas company Total finalized its entry in the project, while China’s CNPC and CNOOC each took 10% stakes.


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