Russia's Arctic LNG 2 temporarily loses bond to its foreign shareholders - Upstream Online
Russia's Arctic LNG 2 temporarily loses bond to its foreign shareholders | Upstream Online
Foreign shareholders in Russia’s next large liquefied natural gas project, Arctic LNG 2, have responded with their own force majeure notices to the project's operator of the same name and its 60% shareholder, the country’s largest independent gas producer Novatek, a report in Moscow said.
Moscow business daily Kommersant quoted unnamed Russian governmental officials as saying that France’s TotalEnergies, a consortium of Japan’s Mitsui and Jogmec, and China National Petroleum Corporation (CNPC) and China National Offshore Oil Company (CNOOC) submitted such notices to Arctic LNG 2 and Novatek to temporary suspend their shareholders’ obligations to the project.
The notices are understood to have been sent after Arctic LNG 2 had reportedly dispatched force majeure notices to buyers of its future LNG production that have contracted supplies on the long-term basis, informing them on its temporary inability to start contracted shipments.
The US administration at the beginning of November imposed sanctions on Arctic LNG 2— that will produce about 20 million tonnes per annum — in a bid to constrain Russian future energy production and LNG export capacity.
The project’s first train is already installed near the shore of the Gydan Peninsula in West Siberia and is said to be technically ready to produce LNG. However, the second and the third trains are still under the construction at a specialised yard in Belokamenka near the Russian port of Murmansk.
Novatek, which Upstream has contacted for the clarification, had not responded by the time of publication.
Each of the four foreign shareholders in Arctic LNG 2 has a 10% interest in the project and the right to offtake an annual volume of LNG that is equivalent to its stake, but also has to finance its share of agreed investments into the project.
Out of the four, only TotalEnergies has said it would not provide financing to the project to comply with international sanctions, adding its decision not to invest in Russia follows the country’s invasion in Ukraine in February 2022.
Reuters also reported last week that the remaining three foreign shareholders have asked the US administration to consider a derogation from the imposed sanctions to enable the offtake of Arctic LNG 2 cargoes.
Novatek earlier in December said that it is continuing the implementation of Arctic LNG 2 despite the US sanctions on the project.
The US earlier this year had slapped sanctions on the two LNG offshore transshipment and storage vessels, Saam LNG and Koryak LNG, operated by a joint venture between Novatek and TotalEnergies.
These two units are intended to free up special high Arctic class LNG carriers that are capable of moving independently without icebreaking support in the Arctic ice with the thickness of up to two metres.
Kommersant uggested that international sanctions are already delaying construction of additional Arctic class LNG carriers for Arctic LNG 2 at a Russian-operated yard in the far east of the country. However, the project may partly rely on the existing fleet of 15 of such vessels for Novatek’s first gas project in Russia — Yamal LNG — to deliver LNG cargoes from Arctic LNG 2’s first train.
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