Novatek Signs 15-Year LNG Supply Deal With CNPC

Yamal LNG rendering, via B3D on Vimeo

Oct. 22 (Bloomberg) — OAO Novatek, Russia’s second-biggest natural-gas producer, will supply the fuel in its liquefied form to China National Petroleum Corp. for 15 years, according to a preliminary accord signed today.

Novatek will sell at least 3 million metric tons of liquefied natural gas a year to CNPC on delivered ex-ship terms, with the price indexed to the Japanese Crude Cocktail, the Tarko-Sale, Russia-based gas producer said today in a statement. The agreement was signed during Prime Minister Dmitry Medvedev’s visit to Beijing. The period of supplies can be extended, according to the statement.

Novatek, which is leading the $20 billion LNG project in the Russian Arctic region, is challenging state-run OAO Gazprom’s monopoly on supplies of super-chilled fuel abroad to benefit from the Asian nation’s rising energy demand. Russia plans to allow Novatek, as well as oil producer OAO Rosneft, to exportLNG from next year.

CNPC agreed in June to buy a 20 percent stake in the Yamal LNG project, joining Novatek and partner Total SA. The deal is expected to be completed by Dec. 1.

Yamal LNG at full capacity will produce 16.5 million tons a year of LNG starting from the end of 2016, according to Novatek.