Novatek and China Team Up on LNG Shipping

Russian independent producer Novatek announced June 7 that it has agreed with Russian shipper Sovcomflot and China’s Silk Road Fund and Cosco Shipping to establish a joint venture to carry LNG exports from its Arctic projects.

Under the agreement, the quartet will establish a long-term partnership: Maritime Arctic Transport (Mart). The new company will allow joint development, financing and implementing of year-round logistics arrangements for shipping hydrocarbons from Russia’s Arctic zone, a statement from the Russian independent reads.

Mart will work on shipping Russian gas to the Asia-Pacific region, as well as organising transit cargo traffic along the Northern Sea Route between Asia and Western Europe. The Silk Road Fund was launched by Beijing in 2014, and is the leading finance provider to projects under the Belt and Road Initiative – the state strategy to run Chinese-owned infrastructure across Asia and into Western Europe.

Chinese gas demand continues to grow dramatically. The country is now the world's second-largest importer of LNG, and is expected to overtake Japan to take top spot in the coming few years.

Novatek is busy accelerating new projects. The company has boosted its profile with a strong push to export LNG from projects in the far east and Arctic since the Yamal LNG project, with three trains each of 5.5mn mt/yr, went online in 2017. It hopes to reach an FID on the Arctic 2 LNG project by the third quarter of 2019, and last month said it plans to raise its target for LNG production capacity to 70mn mt/yr by 2030, from the current 57mn mt/yr.

“The agreement represents an important milestone in developing the transportation of LNG produced by our Arctic projects along the Northern Sea Route,” noted Novatek chairman Leonid Mikhelson. “The development of Mart will facilitate the rapid transformation of the Northern Sea Route into a global and commercially effective transportation corridor between the Pacific and Atlantic basins, as well as in the implementation of the decision made by the leadership of the Russian Federation to increase Northern Sea Route annual cargo traffic to 80mn mt in 2024.”