China expands presence in Russian LNG
Chinese energy group Zhejiang Energy is set to buy a 10% stake in a planned LNG export terminal in the Russian Far East for €500mn ($567mn), the project's operator said on January 19.
Zhejiang has agreed terms to acquire 10% interests in the company developing Yakutsk LNG, YATEC, and Globaltec, which will provide technical solutions for the project, under a deal with A-Property, a Russian firm owned by Russian-Armenian businessman Albert Avdolyan. The transaction is to be closed in October this year.
Yakutsk LNG has been touted as the means of commercialising the vast but under-utilised gas resources of the Russian Far East, where limited local demand and a lack of infrastructure has stifled development. The region's only export route for gas is the Power of Siberia, exclusively used by state-owned Gazprom.
YATEC is currently only a modest producer, supplying 1.7bn m3/year of gas to cover local demand. But it is planning an aggressive exploration campaign to shore up the reserves needed to underpin a 18mn metric ton/year LNG terminal on the shore of the Far East. A 1,300-km pipeline will be necessary for YATEC to send gas to the plant from its fields.
The terminal is expected online in 2027, although the project is still at the design phase.
"The Asian-Pacific countries are the target sales direction for the company as part of our long-term strategy," Avdolyan said in a statement. "The Chinese gas market is one of the most promising and fastest growing. Following the climate agenda, our LNG will be one of the most environmentally friendly in the industry, which fits into China's strategy of achieving carbon neutrality by 2060.
Zhejiang Energy is involved in power and gas supply in east China. It has already reached out to Russia for LNG shipments, signing an agreement earlier this month for 1mn mt/yr of imports from Novatek's 19.8mn mt/yr Arctic LNG-2 project, due online in 2023.
Chinese investors already have an extensive presence in the Russian LNG market. China's CNPC and CNOOC each have a 10% interest in Arctic LNG-2, while CNPC and Silk Road Fund control stakes of 20% and 9.9% respectively in Yamal LNG, which Novatek commissioned in late 2017.
The Yakutsk LNG project is unique, in fact it does not involve any of Russia's three largest gas producers, Gazprom, Novatek and Rosneft.