Russia's second-largest gas producer Novatek and the region of Kamchatka have signed a deal to build a floating liquefied natural gas (LNG) terminal, the company announced on October 23.
The terminal will have capacity of 20mn tonnes of liquefied gas annually. It will serve as a hub for Novatek's major $27bn Yamal LNG project, which is nearly completed despite the sanctions, and it will target the Asian-Pacific region.
Recently Novatek stepped up its LNG ambitions and is planning a $10bn Arctic-2 LNG plant upon the completion of Yamal LMG, using the gas fields on the Gydan peninsula as the resource base for liquefaction. The capacity will match that of Yamal LNG (16mn tonnes that could be revised upwards).
"It is difficult to quantify the potential financial effects on Yamal LNG (and Arctic LNG-2, if it is finally built) of constructing a reloading terminal in Kamchatka, as no information about the potential capital expenditure (capex) has been provided yet," VTB Capital commented on October 24.
The bank noted that while a significant reduction in the freight rate would "clearly be positive" for Novatek, the big capex and reloading costs might in general have a negative financial effect.
On September 28 Fitch Ratings affirmed the Long-Term Foreign-Currency Issuer Default Ratings (IDRs) of Novatek at 'BBB-' with a negative outlook.
According to Fitch, the rating reflects Novatek's strong business profile as a large Russian natural gas producer and exporter of refined and crude liquids, its moderate debt load, which is expected to decline in the short term, and projected positive free cash flow (FCF).
"The rating also takes into account Novatek's constrained access to international debt markets because of the US sanctions, and diminishing, though still present, completion risks associated with its Yamal LNG megaproject," Fitch said. Novatek owns 50.1% of the project, while France's Total and China's CNPC have a 20% stake each, and Silk Road Foundation owns 9.9%.
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