Novatek, Total give final approval to develop Yamal LNG project in Russia

The Yamal LNG board of directors approved a final investment decision for the Yamal LNG project, consisting of the development of the South-Tambeyskoye gas condensate field and the construction of a natural gas liquefaction plant on the Yamal Peninsula, officials said on Wednesday.

All of the relevant corporate approvals had been issued earlier by Novatek (80%) and Total (20%), the current shareholders of Yamal LNG. In coming months, China's CNPC will conclude a deal to buy a 20% stake from Novatek.

The Yamal LNG plant will consist of three liquefaction trains with overall capacity of 16.5 million tpy, according to the company.

The start of commissioning works at the first liquefaction train is scheduled for 2016, with the planned commercial launch of the first LNG train in 2017.

The Yamal project also requires the construction of transport infrastructure, including a sea-port facility and an international airport located at Sabetta (north-east of the Yamal Peninsula).

Up to 16 ice-class LNG carriers of special ARC-7 design will be used to effect year-round transportation of LNG to international markets.

“The Yamal LNG project is a transformative project for Novatek and a key element in the overall strategy to develop the natural gas resources on the Yamal Peninsula and increase the output of LNG from Russia," said Leonid V. Mikhelson, chairman of Novatek's management board.

"In a relatively condensed period of time we have accomplished quite a lot of work with the project establishing a very good base to move forward with confidence to implement our plans," he added.

As part of the project implementation, main tenders have been completed and key contracts have been signed, according to company officials, with the EPC contract awarded to the joint venture of Technip and JGC.

Overall capital expenditures of the project are now estimated at $26.9 billion, of which $2.6 billion have already been financed by the shareholders.

As of Wednesday, the orders for long-lead items (including cryogenic heat exchangers, gas turbines, and the compressors for the liquefaction trains) have been placed; eight (8) production wells have been drilled, more than 3,100 construction workers are already on site.

Additionally, preparation of the construction site for the LNG plant has been completed, the piling of the foundation for the LNG tanks has begun, the construction of the sea-port and airport has reached an advanced stage, and more than 70% of the expected LNG production output has been contracted.

“The successful sanction of Yamal LNG strengthens Total’s global portfolio to sustain post-2017 production over the next decades and further increases our presence in a high potential region of Russia in terms of gas resources," said Yves-Louis Darricarrère, presdent of Total's upstream business.

"Yamal LNG has made tremendous progress in recent months and Total will join forces with Novatek by harnessing all of its expertise and effort to deliver this top-tier LNG project within schedule," he added.