Avdolyan will sell the Chinese share in the gas project in Yakutia

A-Property owns 73% of YATEK and 51% of Globaltek (another 49% belongs to YATEK). But following the deal with Zhejiang Energy, it will retain control over both projects, says Avdolyan’s company spokesman.

Under the preliminary terms of the deal, A-Property will take over the “integrated management” of the LNG project, including design, construction and operational management. In turn, Zhejiang Energy International Limited, which has built several LNG terminals in Zhejiang, will supply raw materials to the Chinese market under an off-take contract (an agreement between a manufacturer and a buyer to purchase goods that have not yet been manufactured). The Chinese company will also participate in the financing of the LNG project in proportion to its share, the A-Property representative adds.

Back in the spring of 2020, Avdolyan’s company announced plans to build an LNG plant with a capacity of up to 13 million tons per year on the coast of the Sea of ​​Okhotsk in the Khabarovsk Territory and a 1,300 km long gas pipeline from Yakutia. This happened six months after the businessman bought up debts and gained control over YATEK – it is planned to produce LNG on the basis of its fields. The project was designed by the French Technip, and its cost was then estimated at more than $10 billion.

Andrey Korobov, CEO of YATEK, said in September 2021 that the cost of the project is €39.2 billion, but the company expects to reduce it by 2-2.5 times. “We, as a company that has spent decades in this zone, are well versed in the cost of construction operations, gas production, and we say that our experience will allow us to significantly reduce CAPEX regarding upstream and midstream,” he said then. At that time, it was already planned that the LNG plant would produce 18 million tons of LNG per year.

“We will be able to name the exact amount of investments in the Yakutsk Gas Project only after the completion of the basic design and engineering surveys,” a company representative now says. According to him, the Giprovostokneft Institute is carrying out intensive work on the design of the pipeline and related infrastructure, the results of which will be ready in a year and a half. The company is also engaged in the growth of gas reserves – in the third quarter of 2022 it is planned to increase them from 431.5 billion to 567 billion cubic meters. m, and by 2025 – up to 1 trillion cubic meters. m, which is sufficient support for the implementation of the Yakutsk gas project.

“The Chinese gas market is one of the most promising and rapidly developing,” said Albert Avdolyan, owner of A-Property (his words are quoted in the message).

“It is important that the first large foreign investor enters the project. This can facilitate the process of attracting financing, including debt, and increases the chances of project implementation. Now, with a higher degree of probability, the project will be financed by Chinese banks,” notes Marinchenko. Korobov said in an interview with the Energy Policy magazine published on January 18 that there are several potential applicants to invest in the project: “Both Chinese and European companies, and large international concerns.”

A week ago, January 11, became knownthat Zhejiang Energy signed a long-term agreement with the largest Russian LNG producer NOVATEK to purchase up to 1 million tons of LNG per year from its new Arctic LNG 2 plant (the first line should be launched in 2023) in the Yamalo-Nenets Autonomous Okrug for 15 years. “The demand for gas in China will continue to grow, it is not surprising that Chinese state-owned companies and agencies continue to support Russian gas projects, including Arctic LNG-2 and [газопровод] “The power of Siberia,” remarks Marinchenko. He assumes that China will be one of the key buyers of gas produced by the Yakutsk gas project, due to the short transport distance.