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Breaking through Gazprom’s export monopoly

Gazprom is challenged by Novatek when it comes to export of LNG. Photo: Gazprom.ru

Novatek, the second biggest gas producer in Russia, is seeking the government’s permission to export LNG from its projected Yamal LNG plant.

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The company, controlled by business tycoon Gennady Timchenko, in November this year formally approached the Ministry of Energy about the LNG export request. Now, Energy Minister Aleksandr Novak says that the request has been reviewed and a report on the issue handed over to President Vladimir Putin.

Mr Novak does not want to reveal the conclusions in the report, Prime.ru reports.

Novatek wants to itself export the Yamal LNG without the involvement of gas export monopolist Gazprom. A total of 15 million tons of LNG will be produced annually in the project, which is developed together with Total. The gas will come from the South Tambey field, a structure which holds an estimated 1,9 trillion cubic meters of gas.

Today, Gazprom has full control over all gas exports from Russia and is likely to fight hard to prevent Novatek’s intrusion in the lucrative business. In a meeting with Novatek CEO Leonid Mikhelson last November, President Putin himself expressed skepticism about a breakup of the export monopoly and made clear that Novatek should  team up with Gazprom in the Yamal LNG project, a press release reads.

However, a liberalization of the gas export regime might still be considered favourably by the Government and Minister Novak in a recent conference indicated that special regulations could be introduced when it comes to LNG, RIA Novosti reports.

Should Novatek’s request be approved by Government and ultimately by Putin, it will be a major blow for Gazprom and mark a shift in Russian energy policy. If the request is turned down, Novatek will have to cooperate with Gazprom Export, the subsidiary unit with which it already in 2010 signed a cooperation agreement.

In any case, Novatek and Gazprom are likely to cooperate closely at Yamal. As a matter of fact, the two companies are currently negotiating over the possible establishement of joint ventures at the gas-rich peninsula. The deal will include four major fields in the area, including the South Tambey, and give Gazprom a 75 percent take and Novatek 25 percent in the joint companies, a press release from Gazprom informs.