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China National Petroleum Corp. (CNPC) has reached a pioneering deal that will make it control 20 per cent of the OAO Novatek's Yamal liquefied natural gas (LNG) project, which would allow Russia's second-largest natural gas producer to enter the Asian market.

China National Petroleum reaches deal with Russia’s Novatek for LNG project

Nathan Andrada – Fourth Estate Cooperative Contributor

Moscow, Russian Federation (4E) – China National Petroleum Corp. (CNPC) has reached a pioneering deal that will make it control 20 per cent of the OAO Novatek’s Yamal liquefied natural gas (LNG) project, which would allow Russia’s second-largest natural gas producer to enter the Asian market.

With the deal, it will make the Yamal LNG project provide long-term supplies for CNPC, and would ship LNG along Russia’s arctic coast via tanker. Novatek currently co-owns the project with an 80 per cent stake, with French oil company Total SA controlling the remaining 20 percent.

Russian President Vladimir Putin witnessed the official signing of the agreement on Friday at the St. Petersburg International Economic Forum, paving the way for the tie-up of CNPC with Novatek and Total SA in the natural gas liquefaction project.

State-owned OAO Rosneft, the world’s largest publicly traded oil producer has joined Novatek, owned by billionaires Gennady Timchenko and Leonid Mikhelson, to challenge OAO Gazprom’s export monopoly while trying to export LNG overseas. Also on Friday, Rosneft and Vitol Group reached a non-binding LNG agreement.

Mikhelson, who is Novatek’s CEO, signed a long-term agreement to export LNG to China as the Russian gas firm plans to begin LNG output at the end of 2016.