NOVATEK will look around on Sakhalin

NOVATEK became, in fact, the only contender for Shell’s share in the Sakhalin-2 LNG project. Leonid Mikhelson’s company is the only Russian player that meets the criteria published by the government. At the same time, NOVATEK itself intends to first audit Sakhalin-2, and only then make a decision on joining the project, where Gazprom remains the main shareholder. It is also unclear whether NOVATEK will be able to replenish its portfolio with gas from Sakhalin and, in particular, receive a Shell contract for 1 million tons of LNG per year.

NOVATEK will explore the possibility of acquiring Shell’s 27.5% stake in the Sakhalin-2 project, but the decision will be made after the audit, CEO Leonid Mikhelson said on September 7. “We are interested in seeing. We will ask the government to be able to thoroughly conduct its own audit, starting with geological, operational and so on. And only after that we will decide to participate in this,” he said (quoted by TASS).

Russian President Vladimir Putin June 30 published a special decree according to which all project property will be transferred to the ownership of the Russian Federation, and the Russian Sakhalin Energy LLC will become the new operator, the shareholders of which will be Gazprom and foreign participants in Sakhalin-2, if they submit an appropriate application. The Japanese companies agreed to these conditions and received shares in the new project in accordance with their previous shares. Shell refused submit an application, and now the company’s share must be transferred to a new shareholder who has passed the selection within four months.

According to a government decree issued on September 6, a potential buyer of a stake in Sakhalin-2 must have experience in large-tonnage LNG production with a volume of over 4 million tons per year and an accumulated volume of at least 40 million tons, as well as experience in operating an LNG plant with a capacity of 4 million tons per year. He must also have valid time charter agreements for LNG carriers with a volume of more than 4 million cubic meters and a period of validity of at least ten years and have experience in international LNG trading in a total volume of at least 40 million tons.

Of the Russian companies, only NOVATEK meets these criteria, since Gazprom does not have such a number of chartered tankers. Gazprom did not comment on its intention to participate in the selection.

Kommersant’s interlocutors note that joining Sakhalin-2 does not look obviously attractive for NOVATEK. NOVATEK will be a minority shareholder in a joint venture with Gazprom, which will not allow it to significantly influence the activities of Sakhalin-2.

The companies have acted as competitors in recent years and, despite several attempts, have not been able to create effective joint ventures either in the field of exploitation of the Yamal fields or in the field of import substitution of gas liquefaction technologies.

In addition, it remains unclear to what extent NOVATEK can gain access to the independent sale of at least part of the LNG from Sakhalin-2 in order to earn money as a trader. Currently, Sakhalin-2 sells 85% of its LNG production under long-term contracts, and the rest is sold on the spot through the project company, and is not distributed to shareholders’ portfolios. The decree of the President of the Russian Federation assumes that Sakhalin Energy will fulfill all existing long-term contracts, including a contract with Shell for 1 million tons per year, expiring in 2028. Since Shell said it no longer intends to buy LNG from Russian suppliers, this volume is likely to be sold on the spot, which is now much more profitable for the project than entering into a long-term contract at a lower price.

According to independent analyst Alexander Sobko, NOVATEK’s participation in the Sakhalin-2 project, if it really takes place, may be an indicator that Gazprom and NOVATEK have set a course for cooperation against the backdrop of sanctions that make it difficult to attract foreign technologies and equipment in the implementation of new projects. LNG projects. In addition, the analyst notes, long-term contracts for the Sakhalin-2 project will begin to expire in the second half of this decade. For NOVATEK, according to Mr. Sobko, in this case, “in theory, it becomes possible to optimize transportation costs through swap operations with LNG projects in the Arctic.”

Tatyana Dyatel, Vladivostok