OVL looks at Russia again, revives Yamal LNG plans

Last Updated: Wed, Jul 18, 2012 19:10 hrs

After almost a year’s lull, ONGC Videsh Limited (OVL), the overseas arm of the state-owned Oil and Natural Gas Corporation, will team up with Petronet LNG and Indian Oil Corporation (IOC) to bid for up to 20 per cent stake in Russia’s Novatek LNG project in the Yamal Peninsula.

OAO Novatek, the second largest gas producer in Russia, after the state-run Gazprom, is looking for international partners to develop the Yamal LNG project and share implementation costs.

But officials close to the development said 15-20 per cent stake in Yamal LNG would mean an investment of around $3.5-4 billion (Rs 19,000-22,000 crore). “The partners will have to finance the capital expenditure in lieu of an equity stake. The Indians would ideally want equity gas i.e. share of the LNG that will be produced for the equity they put in,” said an investment banker closely advising in the ongoing negotiations.



THE YAMAL LNG PROJECT
  • Gas treatment, liquefaction facility
     
  • Onshore LNG plant with 3 production trains of 5 million tonnes per annum
     
  • Gas condensate production capacity of a million tonnes per annum
     
  • Single site-integrated utilities
     
  • To launch first train in Q4 FY16
     
  • Planned capex for field development and LNG facilities $18-20 billion

Source: Novatek

“We are in initial discussions with Novatek. Along with our partners we are looking at either LNG offtake or participation in the development of the project. We are interested in bringing the LNG to India,” said a senior OVL official. “Tax concession and support from the respective governments will be crucial for this deal,” the official added.

OVL MD D K Sarraf declined to comment on the matter. “I do not wish to discuss the deal that we may be or may not be doing in future,” he said, when contacted.

Novatek in a strategy presentation said the planned capital expenditures for Yamal LNG field development and LNG facilities would be around $20 billion (Rs 1.1 lakh crore).

Novatek holds 80 per cent stake in OAO Yamal LNG and its strategic partner Total holds 20 per cent. Yamal LNG’s financial plan, says the strategy presentation, will be based on contributions to charter capital to the tune of 35 per cent by Total; 15 per cent by Novatek and 50 per cent by potential partners. The project will begin generating cash flows in the first phase to the tune of $2 billion. The company will shortlist its partners by the year-end.

The construction and operation of an LNG shipping fleet will be carried out by a third party. Yamal LNG will sign long-term charters with the operator.

The Yamal LNG production facility will include a gas treatment and liquefication facility with an onshore LNG plant with three production trains of five million metric tonnes per annum. The gas condensate capacity will be one million metric tonnes per annum. The planned launch of the first train will be in the fourth quarter of 2016. “It is a very challenging project in the arctic with a lot of difficulties. Even bringing the gas to Asia will be difficult. The details are being worked out,” said an IOC official.



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