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Russian gas producer Novatek bemoans 'unpredictability' of US sanctions

Novatek sees the latest US sanctions against Russia introduced in early April as «a mistake».

Russian gas producer Novatek bemoans 'unpredictability' of US sanctions

Moscow, April 30 - Neftegaz.RU. According to Platts report, Russian independent gas producer Novatek sees the latest US sanctions against Russia introduced in early April as «a mistake», but does not expect any new measures to be levied against Novatek itself, said CFO Mark Gyetvay.

«It has become increasingly frustrating for all involved to deal with the unpredictability of the US Treasury Department and OFAC's threat of sanctions against companies which have no direct involvement in geopolitical matters and are only trying to operate in the spirit of free and open market competition,» Gyetvay said.

He added that, despite positive financial and operational results in the Q1, market gains were recently overshadowed by geopolitics and the threat of further sanctions. Novatek has been subject to sanctions since 2014, but was not specifically named in the latest round, announced on April 6. Panic following that announcement hit Russian companies' market value, however.

«The recent sanctions on April 6 against individual Russian companies and holders of both shares and bonds is a mistake and shook market confidence and facilitated a panic selling spree that was unwarranted,» Mark Gyetvay said.

Novatek used its buyback program to mitigate the impact of the selloff, and is prepared to do so again if necessary. «We will continue to use our share buyback program to support our share price when warranted,» Gyetvay said. He does not expect geopolitics to halt increasing tension to reverse the trend of Europe increasing gas imports from Russia, however.

«Everyone is well aware that Gazproms increased delivery of natural gas volumes to Europe this past year and continued in the Q1 is largely a function of declines in indigenous production in Europe and the North Sea, as well as a partial recovery of the Eurozone's economic activities. So we do not believe that geopolitics will be the deciding factor in sourcing gas from multiple sources,» Gyetvay said.

2018 PLANS

Gyetvay also provided an update on Novateks 2018 plans. The company expects to produce 65 Bcm of gas this year, which would represent a 2.5% drop on 2017 volumes of 66.71 Bcm. Last year, the company exceeded its output forecast, which was 63 Bcm.

He said that he expects liquids output to be flat or increase slightly. In 2017, Novatek's liquids output was 11.774 million mt, or 236,447 b/d, down 5.1% year on year. The company is planning capex of Rb90 billion, or around $1.4 billion, in 2018.

Gyetvay also provided details of planned maintenance at train 1 of Yamal LNG in May, which is expected to take 2 weeks.«Operations at the plant will cease during this period, but it will not impact the delivery of LNG,» Gyetvay said, adding that the company will load LNG from four storage tanks during the maintenance. «Therefore the periodic maintenance work is not expected to impact full-year LNG volumes or the present delivery schedule,» he said.

Novatek launched the 1st 5.5 million mt/year train at Yamal LNG plant in December last year and expects to launc h a 2nd train of the same capacity later this year, with a 3rd train following in 2019. Novatek is also continuing initial work on its Arctic LNG project, and has launched tenders for long-lead items.

«The FEED process is running ahead of schedule and we expect to compile bids and quotes by the end of June subject to further revisions and clarifications and have a good assessment of project costs by the end of October,» Gyetvay said.

He added that, despite the oil price moving ahead of the curve, the company is not planning any major deviation from its strategy. It does not plan to accelerate projects and pursues an opportunistic mergers and acquisitions policy, dependent on attractive investment opportunities appearing close to existing assets, he said

Novatek's Q1 results included a drop of 1% in crude and condensate production on the year to 2.936 million mt, or 239,121 b/d. This signaled a slowdown in the fall in liquids production from last year as higher gas production boosted condensate output, following the company's launch of Yamal LNG late last year. Novatek's Q1 gas output rose 2.2% on the year to 16.5 Bcm.

Author: Rosemary Griffin

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