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Sinopec has signed heads of agreement with Russia's Novatek and Gazprombank to establish a joint venture in China for selling liquefied natural gas (LNG) to local end-users, Sinopec announced.
The joint venture will purchase LNG produced by Novatek in the Arctic, according to the agreement.
The agreement, which is still pending approval, was signed following talks in Moscow between Chinese President Xi Jinping and Russian President Vladimir Putin.
The agreement will be of considerable economic and social benefit and will further diversify China's natural gas imports, while meeting ever-increasing gas demand in the country, according to Dai Houliang, president of Sinopec Group.
Establishment of the joint venture would not only facilitate natural gas sales in China but also provides opportunities for investing in further downstream projects, industry sources said. At the same time, Novatek could mitigate upstream investment risk and control the cost by locking in demand, according to the sources.
This agreement is conducive to the upgrading of the strategic cooperative partnership between China and Russia, which has already led to a string of new energy (mega)-projects.
The northern section of the China-Russia Eastern Gas Pipeline from Heihe to Changling is expected to come on stream in October 2019. The middle section (Changling-Yongqing) and the southern section (Yongqing-Shanghai) are projected to become operational at the end of 2020. Construction of the pipeline started in June 2015.
Gazprom has nearly completed construction of the No 1 pipeline of the Power of Siberia project and put the No 2 pipeline on agenda.
Novatek's Arctic LNG 2 project comprises three 6.6 million mt/year LNG production lines, of which the first is scheduled to be put into production during 2022-2023 and the other two in 2024 and 2025, respectively.
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