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Mitsui and JOGMEC join Arctic LNG-2

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Tanks and Terminals,

Arctic LNG-2 is a step closer to final investment decision (FID) with the entry of Japanese companies Mitsui and government-linked Japan Oil, Gas and Metals National Corporation (JOGMEC) into the project.

NOVATEK’s proposed LNG plant in the Russian Arctic consists of three trains, each with a capacity of 6.6 million tpy. Front-end engineering and design was completed last year, confirming preliminary cost estimates of between US$20 billion and US$21 billion. NOVATEK is believed to be targeting FID this month or next, with start-up of the first train scheduled for 2022-2023.

Mitsui and JOGMEC’s purchase of the 10% stake via a joint venture was announced in the presence of Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe at the G20 meeting in Osaka. President Putin said Japanese investments in the project would total almost US$3 billion. Mitsui will have a 25% share of the stake, and JOGMEC 75%.

Although there are no concrete plans at the moment, Mitsubishi is also rumoured to be interested in joining the newly-created joint venture.

Nicholas Browne, Director of Asia Pacific Gas & LNG research at Wood Mackenzie, said: “Mitsui will undoubtedly be responsible for marketing of the 1.98 million tpy of equity LNG from the 10% stake.

“Mitsui will look to sell some of the volumes within Japan. However, it may also look to trade and sell Arctic-2 volumes into the Atlantic basin. The strong backing of JOGMEC highlights that this is seen as a strategic investment by the Japanese government.”

Nikolai Novikov, Senior Research Analyst, Russia Upstream, at Wood Mackenzie, added: “Energy security considerations, the investment attractiveness of Arctic LNG-2 and improving Russo-Japanese relations have proved deciding factors in getting both Japanese state and private enterprise on board.”

Earlier this year, Total (10%) finalised their entry in the project, while CNPC and CNOOC Ltd each took 10% stakes earlier this year. If NOVATEK decides to lower its stake to under 60%, Total will have an option to buy another 5% in the project.

Mr Novikov added: “With this announcement, the shareholding structure could be final. The next big step will be FID.”

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