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Natural Gas Sales

Our sales of natural gas in the Russian domestic market are mainly through trunk pipelines and regional distribution networks, as well as sales of LNG mainly through its own refueling complexes. The LNG sold on the domestic market is produced at our small-scale LNG plant in the Chelyabinsk Region, or purchased mainly from our joint venture OOO Cryogas-Vysotsk. Our sales of natural gas on international markets are sales of LNG purchased primarily from our joint ventures, OAO Yamal LNG and OOO Cryogas-Vysotsk.

In 2022, natural gas sales volumes, including volumes of LNG sold, aggregated 76.56 bcm, representing an increase of 1% as compared to 2021. Our natural gas sales in the Russian Federation totaled 68.09 bcm, which is a 0.3% increase year on year. Our international LNG sales totaled 8.46 bcm, which is a 6.5% increase year on year. This growth in international sales was driven by higher LNG production at our joint venture Yamal LNG.

Sales in the Russian Federation

In 2022, the total volume of natural gas sold in the Russian Federation amounted to 68.09 bcm, increasing by 0.3% compared to the previous year.

NOVATEK has a key role in ensuring pipeline natural gas supplies to the domestic market. During 2022, the Company supplied natural gas to 40 regions within the Russian Federation. Our end customers and traders were located primarily in the following regions: Chelyabinsk Region, Khanty-Mansiysk Autonomous Region, Moscow and Moscow Region, Lipetsk Region, Perm Territory, Yamal-Nenets Autonomous Area, Vologda Region, Tula Region, Stavropol Territory, Tyumen Region, Nizhny Novgorod Region, Leningrad Region, Belgorod Region, and Kostroma Region. The above regions accounted for more than 92.4% of our total pipeline gas sales in the Russian Federation.

In order to manage seasonal gas demand, historically NOVATEK has entered into an agreement with Gazprom for underground storage services. Natural gas inventories are accumulated during warmer periods when demand is lower and then used to meet increased demand during periods of colder weather. At year-end 2021, our inventories of natural gas amounted to 0.82 bcm.

NOVATEK’s strategy as a natural gas and LNG producer implies greater involvement in the promotion of natural gas as a motor fuel both in Russia and abroad. This market segment represents significant growth potential in the context of increasingly stringent environmental standards. Compared to diesel, LNG significantly reduces the emissions of nitrogen oxides, carbon dioxide and almost completely eliminates particulate matter emissions.

NOVATEK is implementing a pilot project for the sale of LNG as a motor fuel and for autonomous gasification. The implementation of this project is operated by our wholly owned subsidiary OOO NOVATEK–LNG Fuel, which will construct small-scale LNG plants, facilitate LNG wholesale markets and develop a retail network for LNG as a motor fuel in the Russian domestic market.

LNG sales are carried out from our small-scale LNG plant in Magnitogorsk, launched in 2020, located in the Chelyabinsk Region. In 2022, 33 thousand tons of LNG were sold from the Magnitogorsk LNG plant.

Additionally, to provide fuel for automobile transport in the North-Western and Central Federal Districts, LNG is purchased from Cryogas-Vysotsk. In 2022, sales volumes amounted to approximately 38 thousand tons.

In addition to the existing LNG plants, we started construction of two facilities (14.2 mt per year each) in the Kashira and Togliatti special economic zones in the Moscow Region and the Samara Region, respectively. Once launched, these facilities will supply motor fuel to the Central and Volga Federal Districts with a shorter LNG transportation distance.

At the end of 2022, 13 LNG refueling stations for automobile transport were in operations in the Urals, North-Western, Central and Volga Federal Districts of Russia (one of them was built in the reporting year in the city of Petushki in Vladimir Region). These stations are located on the main federal highways, in cities and on the territory of industrial enterprises and allow to provide clean-burning fuel to commercial and municipal transport, as well as heavy haul and highway trucks. In 2022, the volume of sales at filling stations more than doubled, reaching 51 mt.

Sales on international markets

In 2022, NOVATEK sold 8.5 bcm of gas (6.0 mmt of LNG). We sold 80 large-scale LNG tanker cargos from the Yamal LNG plant (including regasified LNG) totaling 7.9 bcm of gas (5.6 mmt of LNG), which is a 6.9% increase year on year, as well as 0.1 bcm of boil-off gas. In the small-scale and mid-scale LNG markets, the Company sold 73 tanker cargos of LNG (including regasified LNG) as well as more than 600 truckloads aggregating 0.5 bcm of gas (0.4 mmt of LNG).

In view of the major structural changes on global gas markets amid the geopolitical situation and unprecedented volatility of global gas prices, NOVATEK is using its best endeavors to avoid production turndowns and secure uninterrupted LNG sales from its large-scale projects. The company is negotiating additional supplies with both existing and new customers, including those from friendly countries, seeking new market areas, and considering ramping up LNG transshipment in the Murmansk Region in order to streamline logistics.

Our successful LNG sales in the leading international markets, flexible and optimized logistics solutions helping reduce the already low carbon footprint of our LNG demonstrate that LNG produced in the Arctic can be highly competitive anywhere in the world.

To cater to the requests for information on greenhouse gas emissions associated with LNG shipping, the Yamal LNG project company and NOVATEK collaborated to develop corporate GHG accounting guidelines (based on GIIGNL's recommended methodologies and ISO standards) in November 2022.

The Company is further ramping up cargo turnover via the Northern Sea Route (NSR) and is working to extend the navigation window for eastbound LNG deliveries from our Arctic projects via this route. In 2022, the port of Sabetta shipped 32 LNG cargoes via the NSR’s eastern sector to Asia-Pacific both under long-term contracts and as part of spot optimizations. Based on the experimental early and late eastbound voyages via the NSR in 2021 and the shipping expertise gained, LNG was also delivered to Asia-Pacific outside the traditional navigation season in 2022.

In 2022, fifteen (15) ship-to-ship transshipment operations were completed at the LNG transshipment point near the Kildin Island in the Murmansk Region. In late 2022, similar ship-to-ship facilities commenced operation at the LNG transshipment terminal in the Kamchatka Territory. Transshipment development projects enable the Company to gain in-house expertise as well as the ability to transship LNG in Russia and streamline the operation of its unique fleet of Arctic-class carriers.