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Russia's Yamal LNG project on track and on budget, says Novatek

* Yamal LNG project to cost $27 bln in total

* Financing issues fully resolved - Novatek CEO

* Future LNG projects should not require state funds -Mikhelson

By Oksana Kobzeva

VLADIVOSTOK, Russia, Sept 5 (Reuters) - Russia's Yamal LNGproject, to build the country's second gas liquefaction plant,is on track and on budget with Novatek and itspartners having invested $18.5 billion so far, Novatek's CEOsaid.

The first phase of the project, in which Novatek is inpartnership with France's Total and China's CNPC andthe Silk Road Fund, is due to start operation some time nextyear and Novatek's chief executive said it was 76 percent ready.

Russia is the world's biggest producer of conventional gasafter the United States but wants to increase its production ofliquefied natural gas (LNG), which currently accounts for lessthan 5 percent of world output.

Investment in the Yamal project, which will require $27billion in total, was at risk after Novatek came under Westernsanctions over Moscow's role in the Ukraine crisis, but theproject has since secured funding from Chinese and Russianbanks, as well from the Russian government.

"To date, we have resolved all issues related to Yamal LNG'sfinancing," Leonid Mikhelson, Novatek's chief executive and amajor shareholder, told reporters in comments cleared forpublication on Monday. "In my opinion, we should implementsimilar projects on our own, not using (Russia state) budgetfinancing in the future."

The Yamal facility will have three production lines when itis completed, each with an annual capacity of 5.5 million tonnesof LNG.

In April, Yamal LNG signed loan deals with Chinese banksworth over $12 billion. It also secured Russian state fundsworth 150 billion roubles ($2.3 bln) from a rainy day fund and3.6 billion euros ($4 bln) from state-controlled Russian lendersSberbank and Gazprombank. RISING COMPETITION

Russia currently operates just one LNG plant, on the PacificIsland of Sakhalin, led by Gazprom , with an annualcapacity of around 10 million tonnes.

Sakhalin-2 plans to expand to add a third production linewith 5 million tonnes of annual capacity some time in thefuture. The United States, Qatar and Australia, however, arealso all expanding LNG production. Novatek, Russia's second biggest producer of conventionalgas, plans to commission its second LNG project, Arctic LNG-2,by 2025 with planned LNG production of up to 16.5 million tonnesa year.

Mikhelson declined to give a cost estimate for Arctic LNG-2project and said that Novatek was not in a hurry to choosepartners for the project.

Japan Bank for International Cooperation (JBIC), which hassigned up to help finance the Yamal project, is also ready tosupport the Arctic LNG-2 project, he said. ($1 = 64.7225 roubles)($1 = 0.8958 euros)

(additional reporting by Olesya Astakhova; writing by KatyaGolubkova; editing by Dmitry Solovyov and Susan Fenton)

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