Novatek in Talks on LNG Transhipment

Russia's liquefied natural gas (LNG) producer Novatek (NVTK.ME) is in talks to tranship its Yamal cargoes in Norway or Russia's Murmansk because it is unsure of the impact of U.S. sanctions on the Chinese COSCO tankers it uses, a Novatek official said.

The United States imposed sanctions on Sept. 25 on state-owned COSCO's subsidiaries, COSCO Shipping Tanker (Dalian) Co and COSCO Shipping Tanker (Dalian) Seaman & Ship Management, for allegedly ferrying Iranian crude.

U.S.-listed ship owner Teekay (TK) LNG said last week its shipping joint venture in Russia, Yamal LNG, had been "blocked" by the U.S. Treasury because its partner China LNG Shipping (Holding) is 50% owned by COSCO Dalian.

The Yamal venture owns four operational and two newly built Arc7-class LNG tankers capable of navigating through Arctic ice, making them key to transporting LNG from Novatek's Yamal LNG plant in northern Russia.

"We have nothing to do with the sanctions, but we don't know if the sanctions may affect the ships owned by the (Yamal LNG shipping) joint venture," Novatek Chief Financial Officer Mark Gyetvay said on Tuesday.

"We have responsibilities before our customers to deliver LNG so we need to protect ourselves," he added on the sidelines of an Oil & Money conference.

At the moment, four Yamal LNG JV vessels are still in use. A fifth is heading to Yamal after its sea trials around South Korea's Daewoo Shipbuilding and Marine Engineering (DSME) shipyard. A sixth is undergoing tests.

Shorter Journeys

Gyetvay said the talks are ongoing and said that the decision the transhipment hub will be made "soon."

Novatek had a deal with Norwegian shipping company Tschudi to reload Yamal cargoes in Norway's Honningsvag between November 2018 and June 2019.

This allowed the company to export the Yamal volumes that came from trains launched ahead of the schedule, while not all Arc7 ships designed to export those were as yet available.

Having a transhipment point in Norway helped the company reduce the time ice-class vessels take to make the journey from Yamal LNG to a place where the cargo can be transferred to a conventional vessel.

Novatek may also use Russia's Arctic port of Murmansk for LNG transhipment, Gyetvay said, adding that using Murmansk for transhipments would be a precursor for a fully-equipped transhipment terminal that is being developed there together with a similar facility in the Kamchatka peninsula.

Gyetvay said that while long-term contracts for Yamal Train 1 and 2 have all started, volumes from Train 3 launched in November last year are still being largely sold on the spot basis. This will remain so until around April. Train 4 is expected to start producing LNG in the first quarter of 2020.

Novatek is the biggest taker of spot cargoes from Yamal, while Total and PetroChina (PCCYF) also have a share in exporting spot LNG from Yamal. 

Reporting by Ekaterina Kravtsova