The Russian Ministry of Natural Resources and Environment is finalising awards of exploration and development licences for two gas blocks on the Yamal Peninsula to Novatek, supporting the global export ambitions of the country’s largest independent gas producer.
Two tracts — Neytinskoye and Arkticheskoye — already contain several hydrocarbon-bearing structures with total estimated recoverable reserves of about 412 billion cubic metres of gas that were discovered in the 1970s.
However, additional exploration may easily double the reserves estimate on the two blocks, according to expectations by industry analysts in Moscow.
The blocks are set to fall into Novatek’s hands without any competition, as the producer earlier obtained an approval from President Vladimir Putin to use them as a source of feedstock gas for its liquefied natural gas projects in West Siberia.
Russian news agency Interfax has quoted a Natural Resources Ministry official as saying that it expects Novatek or one of its subsidiaries to pay a total of 11.8 billion rubles ($162 million) for the two licences.
Auctions procedures which are broadly perceived as a rubber-stamping formality for the issue of the two licences are expected to include requirements for a winner to convert produced gas into LNG, and to utilise LNG facilities on the Yamal Peninsula, in order to be shortlisted for bidding.
Earlier this year, Novatek executive board chairman Leonid Mikhelson wrote to Putin, saying that Neytinskoye and Arkticheskoye will support the expansion of Novatek’s long-planned Obsky LNG project, and also extend the lifetime of the company’s flagship development on the Yamal Peninsula, Yamal LNG.
Yamal LNG is currently supplied with gas from South Tambeyskoye field on the Yamal Peninsula.
However, following the commissioning of a fourth train at the plant earlier this year, and the capacity optimisation and debottlenecking at the other three trains last year, Yamal LNG has been producing gas well above its nameplate capacity of 16.5 million tonnes per year.
To support this higher production rate, Novatek has had to move ahead its plans to drill additional development wells from 10 existing wellpads, according to its tender disclosure notices.
In previous years, authorities are understood to have been reluctant to auction Neytinskoye and Arkticheskoye because some areas of the two blocks lie within the borders of a large protected natural sanctuary.
However, Novatek expects Yamal regional authorities to adjust the borders of the sanctuary to exclude both fields completely from its territory. This is in turn will remove legal restrictions on exploration and development of both tracts.