Russian gas independent Novatek's Arctic SPG 1 subsidiary has been awarded an exploration and development licence for the remote Gydansky block in the Yamal-Nenets autonomous region through an auction at the end of last week.

According to Russian Natural Resources Minister Sergey Donskoy, Arctic SPG 1 has committed to pay 2.26 billion rubles ($40 million) for the licence. The auction terms were effectively tailored for Novatek as the conditions required the potential winner to demonstrate that it already has liquefaction facilities in the Yamal-Nenets region.

The Novatek-led Yamal LNG is due to begin operations of the first train of its liquefied natural gas plant in the port of Sabetta on the Yamal Peninsula before the end of this year. According to the ministry, confirmed gas reserves of the Gydan block are estimated at 116 billion cubic metres.

The block may contain another 362 Bcm of gas resources that have to be confirmed during the exploration work.

Novatek has ambitious expansion plans on the Yamal and Gydan Peninsulas where it wants to develop several gas fields and build between one and two LNG export plants.

Novatek chairman Leonid Mikhelson reiterated last week that LNG to be produced at its fields in the Yamal-Nenets region, will remain competitive on the global market because of low development and production costs, despite the high cost of transportating output across Russian's Arctic waters.

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Exploration licence award for Novatek at Gydansky block