India’s Minister of Oil and Natural Gas, Hardeep Singh Puri, during his visit to the Eastern Economic Forum in Vladivostok in early September, discussed the possibility of LNG purchases from Russia together with the acquisition of a stake in Novatek’s Arctic LNG 2 project. Currently under construction, the Arctic LNG 2 plant on Russia’s Gydan Peninsula is scheduled to enter production in the first stage in 2023 and reach its full capacity of 19.8 million tonnes per year in 2025.
Puri led the Indian energy delegation at the Eastern Economic Forum in Vladivostok last week and met with a number of Russian oil and gas executives, including Novatek CEO Leonid Mikhelson.
India’s leading energy companies Petronet LNG Ltd. and ONGC Videsh Ltd. aim to secure India’s supply of clean energy through the investment.
“Everything is on the table,” Puri replied when asked by reporters if there were any discussions about buying gas or even getting into the equity of Arctic LNG 2, without giving further details.
Puri told Interfax that the consortium of ONGC and Petronet LNG had held talks with Novatek and the offer to buy the shares had been received “only recently”.
A representative of the Indian delegation involved in the negotiations, who wished to remain anonymous, confirmed to reporters that they had discussed buying a 9.9 percent stake in Arctic LNG 2 from Novatek, but no decision had yet been made.
“The sale of a 9.9 percent stake at a reasonable price would be positive news for Novatek in terms of developing long-term cooperation with Indian buyers,” analysts at Moscow-based Sinara Financial Group said in a note on September 7.
In March 2019, Total Group acquired a 10 percent stake in Arctic LNG 2 and joint control of the company for a total amount of RUB 161.8 billion (US$2.5 billion) following the completion of the transaction.
“In the event of a deal, Novatek will retain its 50.1 percent stake in Arctic LNG 2 as it does now in Yamal LNG and should, given the very solid current gas quotations on international markets and the fact that the LNG 2 consortium was already formed in the first half of 2019, before the final investment decision for the project was taken,” the Sinara analysts said.
Previous attempts failed
Initially, Novatek expected European, Russian and Asian lenders to each provide one-third of the financing, but had trouble getting loans for the plant from European lenders, Mikhelson said.
“We have some partners,” Mikhelson told reporters at the Eastern Economic Forum in Vladivostok, “but we don’t see support from their governments.”
Indian state-owned companies have already invested about $16 billion in Russian oil and gas projects such as “Sakhalin-1”, “Vankor” and “Taas-Yuryakh”, according to the oil ministry.
A decade ago, ONGC Videsh, Petronet LNG and GAIL India Ltd. considered buying 20% of Novatek’s first liquefied natural gas project, but the deal did not materialize.
Heiner Kubny, PolarJournal