LNG agreement with China came into force

Mar 12, 2014 12:00 AM

China guaranteed the annual purchasing of 3 million tons of liquefied natural gas from Yamal.

The agreement between governments of Russia and China on the project "Yamal LNG" ensures favorable conditions for investment cooperation of the two countries. It spans the period until 2045 inclusive. The approved bodies for the overall coordination of the cooperation under the agreement are: on the Russian side - the Ministry of Energy of the Russian Federation, and on the Chinese side - the State Energy Administration of the People's Republic of China.

The project "Yamal LNG" involves the construction of a liquefied natural gas (LNG) plant with the capacity of 16.5 million tons per year on the resource base of South Tambeiskoye natural gas field. Proved and probable gas reserves of the deposit amount to 907 billion cubic meters. In addition to the LNG production facilities the project involves the construction of a tanker and icebreaker fleet and also a transport infrastructure with the seaport Sabetta as its center.

The cooperation between Russia and China in the framework of the project - as it is stipulated in the agreement - consists in providing on the Russian side a favorable tax regime for goods produced and used under the project "Yamal LNG" and setting the mineral resources use tax rate of 0% for flammable natural gas and gas condensate that will be extracted from the Yamal fields, as well as establishing a zero rate customs duty on LNG and stable gas condensate.

Furthermore in accordance with the agreement, the Russian side within its competence provides exemptions from the value added tax for equipment, accessories and spare parts imported into the territory of the Russian Federation, if the analogues of them are not produced in Russia.

As for the obligation of the Chinese side, the agreement provides that China is to buy LNG in the amount of not less than 3 million tons per year according to the conditions that will be determined by the long-term LNG contracts between China National Petroleum Corporation or its affiliated organizations and JSC "Yamal LNG" or any of its subsidiaries.

Above that, the Chinese side guarantees that the financial institutions of the People's Republic of China will provide the "Yamal LNG" with loans based on the agreement between China National Petroleum Corporation and JSC "Novatek" together with its subsidiaries on the sale of shares in OAO "Yamal LNG", as well as on the basis of loan agreements.

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