Vitol, Repsol in Arctic LNG 2 supply agreements with Novatek

Russian gas company Novatek has signed agreements with Repsol and Vitol for the supply of LNG from its giant Arctic LNG 2 project being developed on the Gydan Peninsula, Russia.

Arctic LNG 2 Illustration: Image source: Novatek
Arctic LNG 2 Illustration: Image source: Novatek

The non-binding heads of agreement signed with Spain’s Repsol envisions conclusion a 15-year contract with an annual supply of one million tons of LNG from the Arctic LNG 2 project as well as other NOVATEK’s projects. The LNG is to be delivered ex-ship primarily to markets on the Iberian Peninsula.

“The agreement for the sale of LNG would allow us to increase our market presence on the Iberian Peninsula where Russian pipeline gas is not supplied,” noted NOVATEK’s First Deputy Chairman of the Management Board Lev Feodosyev. “Expanding our supply geography and diversifying our long-term contract customer base is consistent with the Company’s strategy to ramp up LNG production in the Russian Arctic.”

Separately, Novatek has signed a similar agreement with Vitol. The deal stipulates concluding a 15-year contract with an annual supply of one million tons of LNG from the Arctic LNG 2 project. The LNG will be shipped on FOB basis to NOVATEK’s transshipment terminals in the Murmansk region and Kamchatka.

 “We commenced contracting LNG volumes from our new project Arctic LNG 2,” Feodosyev. “LNG volumes sold at our transshipment terminals ensures the flexibility of LNG supplies around the world and allows us to create LNG hubs in the Asia-Pacific and Atlantic basins”.

 With the production capacity of 19.8 million tonnes per year (Mt/y), or 535,000 barrels of oil equivalent per day (boe/d), Arctic LNG 2 will develop over 7 billion boe of resources in the Utrenneye onshore gas and condensate field. The project will involve installation of three gravity-based structures in the Gulf of Ob on which three liquefaction trains of 6.6 Mt/y each will be installed.

 Just last month, French oil and gas company Total signed definitive agreements with Novatek for the acquisition of a direct 10% interest in Arctic LNG 2. 

Arctic LNG 2 production will be delivered to international markets by a fleet of ice-class LNG carriers that will be able to use the Northern Sea Route and a transshipment terminal in Kamchatka for cargoes destined for Asia and one close to Murmansk for those cargoes destined for Europe.

The project’s final investment decision is expected to be taken in the second half of 2019, with plans to start up the first liquefaction train in 2023. The project development is expected to cost more than $20 billion.

Offshore Energy Today Staff

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