Gazprom’s main competitor on the Russian market, Novatek, has started selling gas to China under a new scheme, which involves the conclusion of long-term contracts, Kommersant writes.
A long-term contract for the supply of liquefied natural gas (LNG) from the plants of the Arctic LNG-2 project under construction has been signed with the Chinese company Shenergy Group. Under its terms, Novatek will supply three million tons of LNG over 15 years.
The fuel price was not disclosed, but it is indicated that it is formed on the basis of oil prices. Asian countries are expected to become the main buyers of gas from Arctic LNG-2. They plan to sell up to 80 percent of the LNG project produced at the plants.
Novatek has previously signed long and medium-term gas supply contracts with Arctic LNG-2. No specific buyers were named, but market sources spoke of European and Asian (non-Chinese) traders. This will be the first time deliveries to China on a long-term “firm” basis.
At the same time, the company traditionally attaches great importance to short-term contracts and deliveries on the spot (current) market, where shipments are made within two trading days after the conclusion of the transaction. According to the head and largest shareholder of Novatek, Leonid Mikhelson, long-term relationships with buyers give an advantage in negotiations with banks and can provide a lower interest rate on loans.
Currently, the bulk of Russian gas exports to China is carried out through the Gazprom’s Power of Siberia gas pipeline. The first phase of Arctic LNG-2 is planned to be commissioned in 2023, and the project is fully implemented in 2026. Novatek owns 60 percent of the joint venture, another 10 percent are owned by French Total, Chinese CNPC, CNOOC, as well as a consortium of Japanese Mitsui and JOGMEC.