Russia’s Novatek Targeting $5 Billion in Financing for Yamal LNG Project

An LNG storage tank under construction at Yamal. Image: OAO Novatek

By Vladimir Soldatkin

SABETTA, Russia, April 13 (Reuters) – Russian gas producer Novatek hopes to secure $5 billion from global export credit agencies for its Arctic liquefied natural gas (LNG) project Yamal LNG by mid-year, chief executive Leonid Mikhelson said.

Speaking in a northern port where the facilities for Yamal LNG are being built, Mikhelson and the head of French partner Total were upbeat about financing, which has been complicated by Western sanctions imposed on Russia over Ukraine.

Novatek, the major shareholder in Yamal LNG and co-owned by Gennady Timchenko, an ally of President Vladimir Putin, was placed under U.S. sanctions last year, limiting its access to global financing.

But Moscow has vowed to make sure Yamal LNG goes ahead. The project is key to Putin’s drive to maintain Russia’s energy dominance and for plans to carve out a greater share of the frozen sea-borne gas market for Russia.

“Today, the intentions expressed by the export agencies are valued at $5 billion,” Mikhelson told reporters in the northern port of Sabetta, some 2,120 km (1,325 miles) northeast of Moscow.

Patrick Pouyanne, chief executive of Total which owns a 20 percent stake in Yamal LNG, said they had also been in talks with Chinese institutions to raise between $10 and $15 billion.

“If not for sanctions, the financing for the project would have been done already,” Pouyanne said.

Novatek owns 60 percent in the $27 billion Yamal LNG project, alongside Total and China’s CNPC.

The first production unit, with annual capacity of 5.5 million tonnes, is due to be launched in 2017. Peak production of 16.5 million tonnes a year is expected to be reached in 2021.

Apart from bank financing, Novatek has secured 150 billion roubles ($2.8 billion) from Russia’s rainy day National Wealth Fund. Novatek received the first tranche of 75 billion roubles in February and hopes to get the rest this quarter.

The Russian company has also been in talks to sell 9 percent in Yamal LNG to raise funds.

Mikhelson said the company aimed to complete the talks before securing funds on the international market for Yamal LNG. He declined to name potential buyers of the stake.

Mark Gyetvay, Novatek’s chief financial officer, has said Asia-based companies were interested in acquiring the stake.

Putin has urged Russian companies to increase output of LNG and try to double their global market share by 2020 from around 4.5 percent now.

($1 = 53.6000 roubles) (Editing by Elizabeth Piper and Mark Potter)