Russia's second largest liquefied natural gas development, Arctic LNG 2, has finally secured credit lines worth €9.5 billion (US$10.7 billion) needed to complete the project.
The agreements were made with domestic and international banks, with the largest portion of the 15-year project financing line, €4.5 billion, to be provided by a consortium of Russia's largest banks — Sberbank, Gazprombank, VEB Bank and FK Otkrytiye Bank, according to the projects eponymous operator, Arctic LNG 2.
With the exception of Gazprombank, the three other banks are controlled by the Russian government, which earlier provided comprehensive support to the project led by the country’s largest independent gas producer, Novatek.
The operator said that another €2.5 billion has come from a consortium of two Chinese banks — China Development Bank and Export-Import Bank of China.
The remaining credit lines to Arctic LNG 2 for a maximum €2.5 billion have been arranged with the Japan Bank for International Cooperation and several unidentified other creditors, backed by guarantees from “export import agencies of the countries — members of the Organisation for Economic Co-operation and Development”, the operator said.
Construction and development efforts on the project have been mostly financed by shareholders that, besides Novatek with a 60% shareholding, include France’s TotalEnergies, China National Offshore Oil Corporaton and a China National Petroleum Corporation affiliate China National Oil & Gas Exploration & Development Corporation, each with a 10% stake.
The remaining 10% shareholding in the project is held by Japan Arctic LNG, a consortium of Mitsui and Jogmec.
The secured financing covers about half of the estimated investment of more than $21.3 billion that will be required to bring into operation the three-train project, located on the shore of the Gydan Peninsula in West Siberia, between 2023 and 2026.
Total nameplate capacity of the three trains has been set at 19.8 million tonnes per annum of LNG.
However, this figure is widely expected to be exceeded as a result of the low ambient temperatures increasing liquefaction efficiency.
Construction and costs on schedule
According to the latest available disclosure from Novatek, Arctic LNG 2 had reached an overall completion ratio of 52% by the end of the third quarter this year, against 45% at the end of the previous three-month period.
Completion of the first train was estimated at 69% as of 30 September, with cementing works on the first concrete gravity base foundation fully finished.
Under the development plan, topsides that contain the LNG trains and supporting units will be installed on three gravity base platforms at a specialised yard near the Russian port of Murmansk before being towed to the shore of the Gydan Peninsula for tie-in and commissioning.
Meanwhile, Pyotr Oborin, executive director of Novatek’s construction subsidiary, Novatek-Murmansk, has been quoted as saying that the ongoing turmoil on the global commodity markets is seen to be having little affect on the final costs of the GBS and topsides.
Since the end of last year, the subsidiary has witnessed a jump in prices of steel and other metals. However, almost all contracts were signed in advance and thus pricing remained unchanged, he said.
Novatek has been under US and European sanctions since 2014 when Russia annexed the Crimea Peninsula from Ukraine, with restrictions preventing the gas producer from securing project financing loans from western banks at lower rates against the reportedly higher interest attached by banks in Russia and China.
