Yamal LNG closes in on marketing milestone
The 16.5mtpa Yamal LNG project has reserved slightly more than two-thirds of its nameplate capacity for firm buyers both east and west of the Northern Sea Route (NSR), a senior source close to the process told ICIS on 21 October.
“It doesn’t mean that [Yamal LNG] has closed the sales and purchase agreements (SPAs) or the heads of agreements (HOAs) for all these volumes, but that they are allocated to buyers with serious traction in the negotiating process,” the source said, adding that there was scope to close a series of these deals in the coming days and weeks.
While majority Yamal LNG shareholder NOVATEK announced an expected 3mtpa HOA with China’s China National Petroleum Corp (CNPC) on 22 October, the source emphasised there were other agreements at more advanced stages which could see first Yamal LNG volumes head elsewhere.
The first 5.5mtpa train is scheduled for 2017 and the second and third trains are due on line at 12-month intervals thereafter, meaning the full 16.5mtpa nameplate capacity of the phased development will not be up and running until 2019 at the earliest.
“The allocation of volumes according to trains is going to be confirmed and signed off over the next month, but CNPC may not be the one with which we allocate first volumes,” the source said.
There are a mix of buyers at the latter stages of negotiations, including a range of state-owned importers and international portfolio suppliers. Although marketing efforts started in early 2012 targeting roughly a 50:50 split between deliveries to Europe and Asia, the strategy switched early on to maximise sales into Asia, the source said. Yamal LNG has been keen to earn more attractive netbacks from potential buyers right across the Asian continent from Japan to India.
Each prospective buyer depending on their regional downstream context can differentiate their offers, although timing and shipping considerations are also of “the essence”, the source indicated.
CNPC, which is purchasing volumes on behalf of its listed subsidiary PetroChina, has agreed to take at least 3mtpa from Yamal LNG but is in talks to take substantially more with the steady build-up of receiving terminals across China. Meanwhile, the simultaneous growth of Indian LNG import capacity over the coming decade, particularly on its east coast, has also seen increasingly firm Indian buyers come to the fray.
The HOA with CNPC for the first 3mtpa is indexed to Japanese Crude Cocktail on a 15-year extendable term, according to the NOVATEK statement. The source confirmed these deliveries to CNPC/PetroChina terminals, as deliveries to other Asian customers would take place on a steady year-round basis. This comes despite the shipping distances from Yamal increasing drastically during the seven months when the NSR is closed to marine traffic.
From December to late June, thick ice will block the waterways to the northeast of Yamal, preventing ships taking the transit route over the north of Russia towards east Asia.
From July to late November, however, when the ice has sufficiently melted, 16 specially designed Arc-7 Yamal LNG carriers will be able to cut shipping times to East Asia by half compared with the more conventional Suez Canal route ( see GLM 22 June 2012 ).
To guarantee Asian customers with stable year-round deliveries despite the variable shipping distances, Yamal LNG will use a trans-shipment location in northwest Europe ( see GLM 11 July 2013 ).
NW Europe trans-shipment terminal
Yamal LNG is close to selecting its trans-shipment port in northwest Europe, within the next two to three weeks, according to the source. While six import terminals were initially considered, the shortlist now contains only two or three candidates and only one will be selected.
The Dunkirk LNG terminal near the French/Belgian border sanctioned to start up in late 2015, alongside the existing Netherlands’ Gate LNG terminal and France’s Montoir terminal, is thought to have been a strong candidate. While Montoir lies farther from Yamal on the French Atlantic coast, it has already shown its ship-to-ship credentials with the third such operation due to take place at the end of this month.
By transferring cargoes from Arc-7 vessels to conventional vessels in Europe during the Arctic winter months, Yamal LNG will free up more of its specially designed fleet to shuttle back and forth to Yamal to help maintain the frequency of Asian deliveries throughout the year.
Cost visibility clearer
While the big ticket items have already been confirmed, the source indicated the full capital expenditure budget of the project will be finalised shortly. Ownership of the Arc-7 fleet will be concluded in the coming months and “the visibility on the costs and timeline has now reached a point which may allow shareholders to take the formal final investment decision (FID),” the source said.
Russia’s parliament is expected to pass the export liberalisation law by 1 January 2014.
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