Higher production boosted the first-half earnings of Russian gas producer and LNG exporter Novatek more than double compared to year-ago levels, despite lower sales volumes and struggles with its new Arctic LNG 2 export project.
Russia's top LNG producer and exporter reported on Wednesday a net profit of $3.94 billion (341.7 billion Russian rubles) for the first half of 2024, which was 2.2 times higher as compared to the first half of 2023.
Total revenues also rose but so did operating expenses.
Novatek's daily production was 1.82 million barrels of oil equivalent per day (boepd) in the first half of the year, up from 1.78 million boepd for the same period of 2023.
Earlier this month, Novatek said that its natural gas sales dropped in the second quarter and first half of this year compared to the year-ago periods.
Preliminary data on total natural gas sales volumes, including LNG volumes sold, fell by 2.6% year-on-year to 17.83 billion cubic meters (bcm) in the second quarter of 2024. First-half sales dropped by 3.3% and stood at 39.30 bcm, Novatek said last week.
However, the company's oil and gas production rose by 2.7% in the first half of 2024 compared to the same period of 2023. Both natural gas and liquids output grew, by 1.2% and 11.9%, respectively.
While Novatek is boosting domestic production, it has been seeking new markets for its gas after Western sanctions stalled its new project Arctic LNG.
The Arctic LNG 2 project was considered key to Russia's efforts to boost its global LNG market share from 8% to 20% by 2030-2035.
However, foreign shareholders suspended participation in the Arctic LNG 2 project after the Biden Administration announced the new sanctions, effectively withdrawing from the financing of the project and for offtake contracts for the new plant.
The EU added insult to injury last month as it banned new investments, as well as the provision of goods, technology, and services for the completion of Russian LNG projects under construction, such as Arctic LNG 2 and Murmansk LNG, in the first sanctions targeting Russia's gas sector.
By Charles Kennedy for Oilprice.com
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Comments
This was achieved by higher production despite lower sales volumes and Western sanctions against its new Arctic LNG 2 export project.
It goes to show that innovation, dedication and support from the Russian government are enabling Novatek to overcome sanctions successfully.
The Arctic LNG 2 project is projected to boost Novatek's global LNG market share from 8% to 20% by 2030-2035 making it one of the top four LNG producers in the world.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert