Foreign investors are suspending their participation in the most promising Russian liquefied gas supply project "Arctic LNG-2" of the Novatek company.
US sanctions killed a promising LNG project of the Russian Federation
It is noted that foreign investors announced the termination of participation in the project due to force majeure in the form of sanctions imposed by the United States.
It is noted that this means the investors renouncing their obligations regarding the financing and execution of gas contracts.
It is about French TotalEnergies, Chinese CNPC and CNOOC and a consortium of Japanese Mitsui and JOGMEC.
According to journalists of Russian publications, the project is currently missing three critical components of further implementation: sale, financing and transportation of products.
Due to the refusal of financing, the "Arctic LNG-2" project may be left without long-term contracts, and gas will have to be sold on the spot market.
What is known about the prospects of the project
In addition, "Novatek" will independently finance the project. Its cost has already increased by approximately 17% to $25 billion due to the need to purchase additional equipment.
After the refusal of foreign shareholders to take LNG in the project, there are no functioning long-term contracts left, which may threaten default from external financing in the amount of EUR 9.5 billion, the material of the Russian publication "Kommersant" says.
According to Japan's Industry Minister Yasutoshi Nishimura, US sanctions will impact the project, but Tokyo considers the project essential to meet its own gas needs.
According to the media, one main problem is the lack of Arctic Arc7 class tankers. The situation was exacerbated by US sanctions on the Saam FSU floating storage vessels.
Each of these shareholders has 10% in "Arctic LNG-2". Novatek itself owns 60%. JOGMEC told the publication that they continue to analyze the impact of the sanctions on the project, CNOOC was unavailable for comment, and other shareholders did not respond.
"Arctic LNG 2" is a project of the "Novatek" company for extracting natural gas and producing liquefied natural gas on the Gyda Peninsula.
It is the second project of the company's large-tonnage gas liquefaction plant after Yamal LNG. The total capacity of the three stages (6 million tons each) will be 19.8 million tons (over 27 billion cubic meters).
Last week, the first Arctic LNG-2 line started producing LNG. Commercial shipments were planned from the beginning of 2024, and the plant should reach full capacity of 19.6 million tons by 2026. But the deadlines may shift, as the US has added the project operator and its contractors to the SDN-list, which automatically cuts off buyers from Europe and Asia from purchasing LNG due to the threat of secondary sanctions being imposed on them, the journalists of the publication note.
Thus, on November 2, 2023, the project was included in the blocking list of US sanctions against Russia's production and export opportunities in energy.
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