Foreign shareholders freeze participation in Russia’s Arctic LNG 2 -Kommersant

A concrete gravity-based structure (GBS) of Arctic LNG 2 joint venture is seen under construction in a dry dock of the LNG Construction center near the settlement of Belokamenka, Murmansk region, Russia July 26, 2022. (REUTERS/Stringer/File Photo)

Foreign shareholders suspended participation in the Arctic LNG 2 project due to sanctions, renouncing their responsibilities for financing and for offtake contracts for the new Russian liquefied natural gas (LNG) plant, the daily Kommersant reported on Monday.

The project, seen as a key element in Russia’s drive to boost its LNG global market share to 20% by 2030 from 8%, was already facing difficulties due to U.S. sanctions over the conflict in Ukraine and a lack of gas carriers.

China’s state oil majors CNOOC Ltd (0883.HK) and China National Petroleum Corp (CNPC) each have a 10% stake in the project, which is controlled by Novatek (NVTK.MM), Russia’s largest LNG producer and owner of a 60% stake in the project.

Kommersant, citing unnamed sources in the Russian government, said both Chinese companies, together with France’s TotalEnergies (TTEF.PA) and a consortium of Japan’s Mitsui and Co (8031.T) and JOGMEC – which also have a 10% stake each – declared force majeure on participation in the project.

Novatek, CNOOC, JOGMEC and Total did not immediately respond to requests for comment. CNPC and Mitsui declined to comment.

Kremlin spokesman Dmitry Peskov declined to comment on the developments at the Arctic LNG 2 project, referring the questions to Novatek.

The newspaper said the suspension may lead to Arctic LNG 2 losing its long-term contracts on LNG supplies, while Novatek will have to finance the project by itself and sell the seaborne gas on the spot market.

Initial investments in the Arctic LNG 2 project stood at $21 billion. It already faced difficulties in raising funds following Western sanctions against Russia.

Sanctions have also resulted in Novatek declaring force majeure over LNG supplies from the project, industry sources told Reuters last week.

The European Union may also impose restrictions on Russia’s LNG supplies.

A Beijing-based industry official with direct knowledge of the matter told Reuters last week that CNPC and CNOOC have both asked the U.S. government for exemptions from sanctions on Arctic LNG 2.

The second train of the project is due to become operational next year, while the third is expected to start production in 2026.

With three processing trains, Arctic LNG 2’s capacity is meant to be 19.8 million metric tons per year and 1.6 million tons per year of stable gas condensate. Production is due to start in early 2024.

Its first LNG tankers were expected to set sail in the first quarter of next year, according to Novatek.

But industry sources say commercial LNG supplies from the project are now expected no earlier than the second quarter of 2024.

Related stories from around the North: 

Canada: Bill requiring First Nations’ oil and gas development consent spiked in Yukon

Norway: Norway’s oil minister: “We need new discoveries”, The Independent Barents Observer

Russia: Mining, the Arctic Council & Russian LNG–Arctic roundup 2023 with Heather Exner-Pirot, Eye on the Arctic

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