Russia’s Arctic natural resources are becoming an increasingly hot commodity in Asia. Yamal LNG operator Novatek is poised to finalize a deal to ship additional volume of LNG from the Arctic to India.
Russian liquid natural gas (LNG) producer Novatek is expected to ink a deal with Indian state-owned energy company GAIL, which would send more LNG produced at Novatek’s Yamal LNG project to India. The subcontinent is already a minor market for Novatek as the company sent 33 LNG shipments totalling more than 2m tons of LNG to the country.
This new agreement is just the latest effort by India, as well as China, to secure access to Russian Arctic natural resources. In recent months both countries have increasingly become recipients of Russia Arctic crude oil.
The proposed agreement extends beyond the delivery of LNG as Novatek’s CEO Lenonid Mikhelson explained on Monday, as part of India’s energy week conference. The company is looking to partner with India on technical equipment and know-how and the construction of regasification terminals.
As a result of western sanctions on the export of technology to Russia, Novatek has been looking for new partners to replace technical expertise and equipment.
As part of the expected supply deal, GAIL has been requesting that Novatek be responsible for the shipment of the LNG including insurance and related expenses. As HNN previously reported, international insurance companies, including the three largest providers in Japan, have stopped providing certain coverage to vessels carrying Russian cargo.
“Definitely we have plans. We have engineering companies present in India, Indian engineering companies already participate in our projects. We need to expand and grow in that part. We would like to invest in promotion of demand, and regasification terminals and LNG retail stations,” Mikhelson told Reuters on Monday.
“Now we are negotiating with more than one company on long-term LNG supply contracts to the Indian market,” Mikhelson also stated.
India’s growing LNG demand
As part of this broad approach to send more product to India and in addition to the pending deal with GAIL, Novatek announced that it had signed a memorandum of understanding with the Deepak Fertilisers and Petrochemicals Corporation for the supply of LNG and low-carbon ammonia. The supply will include deliveries from Novatek’s upcoming Arctic LNG 2 project.
“Mutually beneficial energy cooperation between our countries is actively developing, and the signed MoU will contribute to its further strengthening”, noted Mikhelson.
Mikhelson emphasized that India was one of the world’s fastest-growing energy markets. The country’s natural gas demand, of which up to 70 percent will be supplied in the form of LNG, is forecasted to grow five-fold in the next decade. India currently operates six LNG import terminals, but will require many more to keep up with growing demand.
We did not hear from anyone about the intention to terminate them.
Novatek’s CEO Lenonid Mikhelson
Competition for Russian Arctic LNG
Increased supply to India and, as previously announced, to China, stand in direct competition to deliveries to Europe. In 2022, the European continent received 14.65m tons of LNG from Yamal LNG, around 75 percent of the plant’s total production, and around 20-25 percent more than in 2021.
Unlike oil and pipeline gas imports, LNG deliveries from Russia have not been subject to sanctions. A number of European countries, including France, Belgium and Spain, now receive substantially more Russian LNG than they did before the start of the Ukraine war.
The past year has been enormously profitable for the company despite western sanctions affecting exports and timelines related to projects under construction. According to Mikhelson the company’s profits grew by around 50 percent in 2022.
“The long-term contracts that we had, from all the buyers, we did not hear from anyone about the intention to terminate them,” explained Mikhelson.
In additional company news and confirming previous reporting by HNN, Mikhelson also announced that its new flagship project Arctic LNG 2 and two floating transshipment hubs are on schedule to begin operating by the end of 2023.