Russian natural gas giant Novatek has set up a new China-based marketing team to explore selling shipments of Arctic liquefied natural gas (LNG) in the vast Chinese domestic gas market, according to traders with knowledge of the matter.
Novatek, which is not under U.S. sanctions, is one of the few global companies, along with BP and Shell, that now has a foothold in China’s highly competitive wholesale gas market. The company is the latest to attempt to boost gas sales to China after Moscow’s exports to Europe plunged following the conflict in Ukraine.
Novatek’s China team is offering a 15,000-metric-ton LNG cargo, part of a 75,000-ton shipment from its majority-owned Yamal project in the Arctic that is due to arrive in China later this month. The team has reportedly sold around 60,000 tons of the cargo to Beijing Gas Group, although one source said Beijing Gas bought the gas from an intermediary.
Novatek faces challenges in marketing the Russian fuel at attractive prices in China, as the country has growing domestic gas production and increasing piped gas supply from Russia. LNG dealers in China also face thin margins in a crowded market with state-owned traders and independent importers.
Traders say buyers would naturally expect a discount on the Russian cargo due to the geopolitical situation. Novatek’s new China operations include a Beijing office, a Shanghai-based trading unit, and a shipping arm, as the company seeks to penetrate the world’s top LNG import market.
While Novatek’s new Arctic-2 LNG project is largely stalled due to U.S. sanctions, shipments from its older Yamal project continue to flow to China and Europe under long-term contracts.