China and Russia have strengthened their energy partnership in the past two years, especially with the Yamal liquefied natural gas (LNG) project in the North Pole developed by Novatek, Russia’s biggest private natural gas producer, the Beijing-based Economic Observer reported this week.
Novatek two years ago started negotiations and later entered an agreement with China National Petroleum Corporation (CNPC), China's largest oil and gas producer, in which the latter will become the biggest buyer of LNG in the Yamal peninsula, making it a highlight in the energy projects between China and Russia in 2014 signed by the countries' top leaders.
China will become the largest fund provider for the Russian project, offering nearly $20 billion, said Jiang Qi, project manager for CNPC's Russian projects.
In a report published by the Want China Times on Wednesday, Novatek initially had difficulty obtaining financing for the project given its extremely remote location in the Arctic and the logistics involved, with 90 percent of the world's natural gas companies marking the project, the largest in the world, as impossible.
In 2014, Novatek was finally given approval by the Russian government to export its LNG after obtaining investments from CNPC and France's Total, with each accounting for 20 percent of the total stake and Novatek getting the remaining 60 percent.
To date, the Yamal has signed contracts to export 96 percent of its output to customers worldwide, of which 70 percent will be sent to China and other Asia-Pacific countries.
The even bigger breakthrough is that the project will directly ship LNG to Nanjing, China, via the Northern Sea Route, the report said.
The trip, which will take only 12 days compared to the 38 days needed to ship through the Suez Canal, will use 16 ARC-7 class dedicated transport ships capable of year-round transport even during winter.
The Yamal project has an annual production capacity of 16.5 million tonnes of LNG and a total investment of $27 billion.
The economic sanctions on Russia by Western countries have made it difficult for Novatek to get financing for the Yamal project. Instead, Novatek looked for financing in Chinese companies, which have strong demand for LNG, the Want China Times said in its report.