China National Petroleum Corp. (CNPC) announced acquisition of a 20 percent stake in Novatek-led Yamal LNG project on June 24.
The Chinese oil and gas producer said yesterday that it had signed an agreement with Novatek, the second-biggest natural gas provider in Russia, over acquiring a 20 percent stake in the Yamal LNG project and the deal was expected to be completed on October 1 this year. The acquisition was significant as through it, it would launch oil and gas exploration and development in the arctic regions.
The Yamal LNG project is located in the Yamal-Nenets autonomous region and in it, Novatek controls an 80 percent stake currently. It is expected to run into operation in 2015 or 2016 and the annual output will hit 15 million tons in 2018. As a natural gas-rich region, it has natural gas reserves of 3.4 billion barrels of oil equivalents.
Zhou Jiping, chairman of CNPC, said that the project would help China own a long-term stable LNG supply. Wang Zhen with the China Energy Strategy Research Institute pointed out in an interview that balance in the supply of natural gas globally had been broken up and the demand of Europe would continued dropping. Thus Russia would see the increment of natural gas depend much on the Asian market, especially China.
Chinese oil and gas producers show rising interest in oil exploration and development in the arctic regions. An insider with China Petroleum & Chemical Corp. (Sinopec Group), domestic archrival of CNPC, confirmed in an interview on June 13 that it did be in initial talks with the Icelandic government over oil exploration in northeastern coastal waters of the country. Prior to this, China National Offshore Oil Corp. (CNOOC), the biggest offshore oil producer in the Chinese mainland, said publicly that it had been invited by the Icelandic government as well as Iceland-based EykonEnergy to take part in offshore oil and gas exploration and development in the arctic waters of the country and both sides were busy with a negotiation currently.
In line with industry observers, it should be a strategic move for the two Chinese oil firms to enter the arctic regions and the active attitude of Iceland will help them to achieve the goal smoothly. However, both the cost and related technology threshold will be high still in the short run. Notably, there will be great possibility for them to be opposed by environmental protection organizations once related projects are triggered. Thus it is better for them to work out an emergency scheme in advance.
