Foreign shareholders freeze participation in Russia's Arctic LNG 2
MOSCOW (Reuters)—Foreign shareholders are suspending participation in the Arctic LNG 2 Russian liquefied natural gas (LNG) plant project due to sanctions.
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 and China National Petroleum Corp (CNPC) each have a 10% stake in the project, which is controlled by Novatek, Russia's largest LNG producer and owner of a 60% stake in the project.
Russian daily Kommersant, citing unnamed sources in the Russian government, said both Chinese companies, together with France's TotalEnergies and a consortium of Japan's Mitsui and Co. 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 B, and 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, according to industry sources.
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 MM metric tpy and 1.6 MMtpy 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.
However, industry sources say commercial LNG supplies from the project are now expected no earlier than the second quarter of 2024.
(Reporting by Lidia Kelly in Melbourne and Vladimir Soldatkin in Moscow; additional reporting by Andrew Hayley in Beijing, Anastasiya Lyrchikova in Moscow and Yuka Obayashi in Tokyo; editing by Edmund Klamann and Jamie Freed)
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