WoodMac predicts Arctic LNG 2 FID this or next month

Arctic LNG-2 is a step closer to final investment decision (FID) with the entry of Japanese companies Mitsui and government-linked Japan Oil, Gas and Metals National Corporation (JOGMEC) into the project.

Novatek’s proposed liquefied natural gas plant in the Russian Arctic consists of three trains, each with a capacity of 6.6 million tonnes per annum (mmtpa).

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

Mitsui and JOGMEC’s purchase of the 10 percent 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 $3 billion. Mitsui will have a 25 percent share of the stake, and JOGMEC 75 percent.

Although there are no concrete plans at the moment, Mitsubishi is rumoured to be interested in joining the newly-created joint venture, WoodMac said.

The consultancy’s Asia Pacific Gas & LNG research director, Nicholas Browne, said, “Mitsui will undoubtedly be responsible for marketing of the 1.98 mmtpa of equity LNG from the 10 percent stake.

“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.”

Wood Mackenzie’s Nikolai Novikov, added, “Energy security considerations, the investment attractiveness of Arctic LNG-2 and improving Russo-Japanese relations have proved deciding factors in getting both Japanese state and private enterprise on board.”

Earlier this year, Total (10 percent) finalized their entry in the project, while CNPC and CNOOC each took 10 percent stakes earlier this year. If Novatek decides to lower its stake to under 60 percent, Total will have an option to buy another 5 percent in the project.

Novikov added that with this announcement, the shareholding structure could be final. The next big step will be FID.