Novatek Yamal focus set to pick up

Russia's largest independent gas producer, Novatek is expected to expand and accelerate new fields on the Yamal Peninsula.

Novatek is currently building a plant on the Peninsula. The first yield is expected in 5 years time. The company says it's investing $100 million into the liquefied natural gas project this year.Mark Gyetvay chief financial officer, Novatek says all first stage preparations have been done carefully to begin extraction. “There is Shell, there is Total, there is Exxon Mobil has looked at it, ConocoPhillips, smaller companies have looked at it, Japanese firms have looked at it, so we are looking at a series of strategic partners, who have studied the particular geology, who have studied the concept.  We are finished on the exploration side, we are drilling three wells this year.  There has already been fifty five exploration wells already drilled, and then we will engage the contractor, which was CB&I Lummus, to start with what we call the feed study.  And so we have completed the initial work, and now all the infrastructure activities are underway in the Yamal Peninsula.” Novatek founder Leonid Mikhelson said Novatek’s capex is projected to rise 25%-30% year-on-year in 2011. Novatek’s 2010 operating results will show the company gaining nearly 15% in gas output, with liquids rising 19% year-on-year.  Artem Konchin, Equity Analyst UniCredit Securities says Novatek will focus on its pipeline projects investments and will gradually increase its output.“We expect the guidance to have a largely positive effect. Novatek’s 2010 output exceeded our expectations by nearly 0.8bcm, and its 2011 guidance calls for more strong volume growth in the gas segment. Our current production forecast calls for an 11% gain year-on-year, with the company’s 2010 numbers and updated 2011 guidance positively impacting our forecasts for this year. At the same time, we see little room for further gains in liquids output, as Novatek’s policy of shifting to wet gas production will likely reach some limits based on asset potential. Novatek’s investment schedule for 2011 appears to include funding for its Ust-Luga oil terminal project and development of the Yamal LNG gas field. We see this as supportive for NVTK’s production profile and its ability to monetize its gas output by gaining domestic market share.”In addition, the gas producer is thinking over which strategic partners will obtain a minority 49% stake in Sibneftegas owned by Intera for 25.88 billion roubles as an offer bid. The deadline for the offer is April 2011. Novatek has already forwarded the offer to Sibneftegas minority shareholders. The offer price equals 51% of Sibnefetegaz shares acquired by Novatek from Gazprom which obtained Sibneftegaz controlling stake for $131.5 million from Intera after three years of unsuccessful attempts and negotiations with Gazprom to provide access to a gas pipe to launch Beregovoe field.