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Business deals

Russia's Novatek to sell stake in Arctic gas project to Chinese partners

MOSCOW (Financial Times) -- Novatek, Russia's top independent gas producer, Thursday signed binding deals on the conditions to sell a 20 per cent stake in its second Arctic gas liquefaction project to Chinese partners, equally split between China National Oil and Gas Exploration and Development Corporation and China National Offshore Oil Corporation.

The deals - signed at the One Belt, One Road forum in Beijing - makes CNODC, a subsidiary of China National Petroleum Corporation, and Cnooc the second and third foreign shareholders in Arctic LNG 2, after France's Total bought a 10 per cent share in the $20bn project earlier this year.

Novatek did not disclose the worth of its deals with the Chinese companies, but noted it was a step to continue firming its relations with China, which already owns nearly a third in Novatek's first liquefaction plant, Yamal LNG, through CNPC's 20 per cent and Silk Road Fund's 9.9 per cent.

"China represents one of the key consuming markets for our LNG sales," Leonid Mikhelson, chairman of Novatek's management board, said. "Arctic LNG 2 will be a game-changer in the global gas market, and our proven track record to successfully build an LNG facility in the Arctic zone, combined with a proven logistical model with access to prospective markets and large hydrocarbon resource base will ensure the successful implementation of this world class project".

The 19.8m tonnes/year LNG plant, is expected to be launched in 2023 on the Gydan peninsula across the bay from Yamal LNG, which was launched in December 2017 and is already shipping LNG across the globe.

Arctic LNG 2 has also attracted other suitors, including from Saudi Arabia, which said late last year it may seek a 30 per cent stake. Novatek, however, has previously flagged its intention to retain a 60 per cent in the project.

The stake sale in Arctic LNG 2 to Total in March helped push Novatek's net profit to a record high Rbs382bn ($6bn), up nearly nine-fold year on year and assisted by a stronger dollar, the company also reported Thursday.

"The increase was primarily due to the recognition of a net gain on disposal of a 10 per cent participation interest in the Arctic LNG 2 project in March 2019 in the amount of Rbs308.6bn," and higher hydrocarbons prices in roubles, the company said. Oil and gas are priced in dollars, which translated favourably into the Russian currency.

The sale and currency factors aside, liquefied natural gas sales rose thanks to the ramped-up Yamal LNG plant, which alone contributed a 40 per cent increase in net profit, it said.

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