Dec. 18 (Bloomberg) -- OAO Novatek and Total SA approved a final investment decision on their liquefied natural gas project in the Russian Arctic, increasing estimated costs by 35 percent.
The board of Yamal LNG endorsed a three-unit liquefaction plant with capacity of 16.5 million metric tons a year, Novatek said in a filing. Capital expenditures may reach $26.9 billion, of which $2.6 billion has already been funded by shareholders, it said. It previously forecast project costs at $20 billion.
The LNG plant, Russia’s second, will increase the country’s output of the super-chilled fuel as global demand climbs. It will allow Novatek, based in Tarko Sale, to export gas for the first time after President Vladimir Putin this month ended state-run OAO Gazprom’s monopoly on LNG shipments abroad.
The plant will process gas from the South-Tambeyskoye field on the Yamal Peninsula. Novatek owns 80 percent and Paris-based Total holds the rest.
“The successful sanction of Yamal LNG strengthens Total’s global portfolio to sustain post-2017 production over the next decades,” Yves-Louis Darricarrere, Total’s president for upstream, said in a separate statement. The decision “further increases our presence in a high-potential region of Russia in terms of gas resources.”
Commissioning of the first LNG unit, or train, is scheduled to begin in 2016, with commercial production in 2017, Novatek said. The main tenders have been completed and about 70 percent of the LNG output has already been contracted, mostly to Asia, as well as to Europe, the statements show.
Novatek’s stake in the project is set to fall when China National Petroleum Corp. buys a 20 percent interest from the Russian producer. The companies agreed to the transaction in September subject to regulatory approvals.
Russia’s only LNG plant is in the country’s Far East, and is controlled by Gazprom.
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