The Arctic LNG 2 project is being developed in the Gydan Peninsula. Credit: PAO “NOVATEK”.

Russian natural gas producer Novatek has brokered a long-term LNG sales and purchase agreement to Chinese state-owned firm Shenergy Group Company.

As per the terms of the agreement, Novatek Gas & Power Asia will supply more than three million tonnes of LNG over a period of 15 years.

The LNG will be produced from the $25.5bn Arctic LNG 2 project, which is being developed in the Gydan Peninsula in the northern part of Siberia, Russia.

The Arctic LNG 2 project is expected to have an annual production capacity of 19.8 million tonnes (Mt) of LNG.

It is planned to be delivered to LNG terminals in China on DES basis.

Novatek management board chairman Leonid Mikhelson said: “Our LNG commercial strategy is to diversify our client base and target end consumers in the fast-growing Asian Pacific region, and the LNG volumes produced from our Arctic LNG 2 project is core to our long-term objective of delivering affordable, secure and sustainable natural gas for many decades.

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“The Chinese market is one of the key regions in our LNG marketing strategy, and we plan to further increase our supplies of liquefied natural gas to this country.”

The Arctic LNG 2 project involves construction of three LNG liquefaction trains each with 6.6 million tons per annum, as well as cumulative gas condensate production capacity of 1.6 million tons per annum.

Novatek holds a 60% stake in the project and its partners include Total (10%), CNPC (10%), CNOOC (10%) and the Japan Arctic LNG, consortium of Mitsui & Co and JOGMEC (10%).

In a separate development, 18 companies, including Baker Hughes and AXA Group, have reportedly backed out from work on Russia’s $11bn Nord Stream 2 natural gas pipeline following sanction threats by the US Government.

Although only one company has been imposed sanctions, the US has threatened to “take further action” on other companies involved in the development of the project, DW reported, citing a US State Department report for Congress.

The US President Joe Biden considers the project as a “bad deal” for Europe. Many lawmakers and officials in the US believe that the Nord Stream 2 project would increase political and economic leverage of Russia over Europe, Reuters reported.

Owned and operated by Gazprom through its wholly-owned subsidiary Nord Stream 2, the 1,200km-long natural gas pipeline will connect Europe to the world’s largest reserves in Northern Russia.