Novatek has received exploration and development licences for two gas and condensate blocks on the Yamal Peninsula in West Siberia.

The blocks are in the Yamal-Nenets region, which already hosts a first liquefied natural gas development, Yamal LNG.

Russia’s largest independent gas producer said it has agreed to pay about 13.2 billion rubles ($175 million) to the government for two 27-year licences following a recent auction that was limited to Novatek and its regional subsidiaries.

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Two tracts — Neytinskoye and Arkticheskoye — already contain several hydrocarbon-bearing structures with total estimated recoverable reserves of 412 billion cubic metres of gas.

These structures, discovered in the 1970s, are expected to have a significant upside today.

Earlier this year, Novatek executive board chairman Leonid Mikhelson reportedly wrote a letter to President Vladimir Putin, saying that Neytinskoye and Arkticheskoye will supply gas to Novatek’s Obsky LNG project, recently renamed the Obsky Gas Chemistry Complex.

The project is due to have two processing lines to convert gas output from the West Seyakhinskoye and Upper Tiuteyskoye gas and condensate fields into about 5 million tonnes of ammonia per year.

The broader plans suggests production will be exported to Japan and elsewhere in Asia as a source of blue hydrogen.

The planned facility will also produce methanol, and is expected to employ carbon capture and storage (CCS).

Estimated recoverable reserves of the two acquired assets are already about 150 Bcm of gas above the total resource estimate for Seyakhinskoye and Upper Tiuteyskoye.

Reserve assessments for Neytinskoye and Arkticheskoye are widely expected to be increased during fresh exploration efforts.

The two tracts may also extend the lifetime of the flagship Yamal LNG project once production from the South Tambeyskoye gas field starts to decline, according to Novatek.

The company is targeting the start-up of commercial hydrogen production and CCS projects on the Yamal Peninsula within five years.

The head of its department for alternative energy & offshore technologies, Dmitry Akimov, recently said the company intends to implement these projects “concurrently to achieve synergy”.

It has also focused on ammonia as offering new markets for use in marine transport, electricity generation and industrial consumption.