LNG

Novatek, the largest Russian natural gas company after Gazprom and operator of the Yamal liquefied natural gas export plant in northern Siberia, has issued third-quarter production and sales details showing higher domestic gas sales and much lower volumes of LNG sold.

Novatek, the operator of the Yamal LNG plant in Arctic Russian and developer of the Arctic LNG II joint venture, has won the auctions for two subsoil licence areas, including the Arkticheskoye and Neytinskoye gas fields on the Yamal Peninsula in the Yamal-Nenets Autonomous Region of Northern Siberia.

Novatek’s bidding was carried out by the wholly owned subsidiary Yamal LNG Resources.

The Arkticheskoye and Neytinskoye fields have combined estimated hydrocarbon reserves of 2.9 billion barrels of oil equivalent, including 413 billion cubic metres of natural gas and 28 million tons of liquids, according to the Russian hydrocarbon classification system.

The licence terms are for 27 years and resulted in cumulative one-time payments for the subsoil use of 13.15 billion Russian roubles ($180 million).

“The new licence areas are located in close proximity to Novatek’s existing assets on the Yamal Peninsula and expand the company’s resource base for implementing LNG projects,” said Novatek.

The current Yamal LNG feed gas comes mainly from the South Tambey (Tambeyskoye) gas field, located near the port of Sabetta on the Yamal Peninsula.

South Tambey contains 72 commercially viable gas layers, including 33 shallow dry gas layers and 28 deeper gas layers. The depth of these layers varies from 900 metres to 2,850m.

This means the new fields to be developed in the future will not need to come in stream for about 15 to 20 years to supply Yamal LNG, though another project could be developed from the resources.

Reserves

The South Tambey field’s estimated reserves stand at 44 trillion cubic feet of gas and 550 million barrels of condensate, while the proven reserves stand at 1.26 Tcf of gas and 51.6MT of gas condensate.

South Tambey is capable of producing up to 27 Bcm of natural gas a year over 20 years.

A total of over 200 directional production wells are planned to be drilled for the full development of the field.

Novatek’s upstream activities and LNG projects are concentrated mainly in the prolific Yamal-Nenets region, which is the world’s largest natural gas producing area, accounting for around 80 percent of Russia’s gas output.

The existing Novatek Yamal LNG facility has annual output of over 18 million tonnes power annum

The company also expects that all three liquefaction Trains at the Arctic LNG II plant will come on stream on the Gydan Peninsula in a two-year time span from 2023.

The start-up of the first Arctic LNG II Train is planned for 2023, the second in 2024 and the third Train in 2025.

Arctic LNG II will produce 19.8 million tonnes per annum of LNG from the principal feed-gas resources, the Utrenneye gas fields.

The new Arctic plant involves the installation of three gravity-based structures in the Gulf of Ob and related LNG storage facilities of a combined 687,000 cubic metres capacity.

Novatek is the largest independent natural gas producer in Russia and is second only to Gazprom.

Russian natural gas company and liquefied natural gas developer Novatek said it won an auction for exploration and production rights in the North-Gydanskiy licence area located in the Yamal-Nenets Autonomous Region of the Gydan Peninsula and partly in the shallow waters of Gydan Bay in the Kara Sea.

“The North-Gydanskiy licence area has estimated hydrocarbon resources of 9.8 billion barrels of oil equivalent according to the Russian resource classification system,” said Novatek.

The licence term is 30 years and the auction resulted in a one-time payment for the licence of 775.4 million Russian roubles ($10.3M) by Novatek.

“The new licence area borders Novatek’s existing assets on the Gydan Peninsula and expands the company’s resource base for implementing new LNG projects,” explained the company.

Novatek owns the existing Yamal LNG export plant and is constructing the Arctic LNG project on the Gydan Peninsula.

Arctic LNG II will produce 19.8 million tonnes per annum of LNG as well as gas concentrate from the principal feed-gas resources, the Utrenneye gas fields, adding to the existing Yamal facility’s annual output of 17.5 MTPA.

The Russian company holds 60 percent of the Arctic LNG II project and four other 10 percent stakes are shared between various shareholders.

The 10 percent holdings belong to French major Total, which is also a shareholder in the Novatek company, China National Petroleum Corp., China National Offshore Corp. and a Japanese investor group comprising Mitsui & Co. and the government institution, the Japan Oil, Gas and Metals National Corp.

In its most recent earnings Novatek reported declines in annual revenues and profits because of the adverse effects of Covid-19 for much of 2020 and the impact of a weaker Russian rouble.

Novatek said its total gross revenues in 2020, including stakes in joint ventures, dropped by 17.5 percent to 711.8 billion roubles ($9.6Bln), and its gross profits fell 15 percent to 392.0Bln roubles ($5.3Bln).

This was largely due to a decline in global commodity prices for hydrocarbons while Novatek also reported a fall in its own LNG sales volumes on international markets.

Profits attributable to Novatek shareholders came to 169Bln roubles ($2.28Bln), excluding the effects of foreign exchange losses, down from 245.0Bln roubles ($3.3Bln) in 2019.

When counting foreign exchange losses, Novatek’s annual net income came to 67.8Bln roubles ($907 million), even as its output of natural gas increased.

Novatek’s natural gas production including its proportionate share in the production of joint ventures increased by 3.6 percent compared with 2019.

The natural gas output in 2020 amounted to 77.36 billion cubic metres, up from 74.70 Bcm in 2019.

Novatek’s own equity sales on international markets as LNG declined to 8.92 Bcm from 12.79 Bcm in 2019.