Indian consortium in race to bag $2-bn stake in Russia LNG project

OAO Novatek holds 60% stake in Yamal LNG, while Total S A and China National Petroleum Corp hold 20% each

A consortium of Indian companies ONGC Videsh, Indian Oil Corporation and Petronet LNG is in the fray to acquire a nine per cent stake in Russia’s Novatek LNG project in the Yamal Peninsula for $1.8-2 billion.

As part of the deal, the companies plan to buy five million tonnes of liquefied natural gas annually from the project.

OAO Novatek, the second-largest gas producer in Russia (after Gazprom), is scouting for international partners to develop the Yamal LNG project and share implementation costs. OAO Novatek holds 60 per cent stake in Yamal LNG, while Total S A and China National Petroleum Corp hold 20 per cent each. In September, OAO Novatek had sold 20 per cent stake to China National Petroleum Corp (CNPC).

“We are looking for about nine per cent remaining stake available in the project. Out of the $20-billion overall project cost, this would cost us $1.8-2 billion,” said an ONGC official privy to the development. The Indian consortium was earlier eyeing 20 per cent stake in the project but CNPC had grabbed the stake.

It is expected the bids for the acquisition of stake would be submitted soon. “For equity stake, the partners will have to finance the capital expenditure. The companies in the fray want equity gas, that is, share of the LNG from the project. The partners are taking Petronet LNG along for this purpose,” said an investment banker aware of the development.

In 2010, the Russian government had approved a comprehensive plan to develop production of liquefied natural gas on the Yamal Peninsula. It was planned the project would have an annual capacity of 16 million tonnes, based on feedstock resources of the South-Tambeyskoye field.

The field is expected to have 907 billion cubic metres of natural gas reserves. The project includes an Arctic port and an airport at Sabetta in northeast Yamal Peninsula.