Russian Arctic LNG 2 Project Hit by US sanctions

Tuesday, December 26, 2023

Japan's Mitsui and Co has decided to pull its employees out of Russia's Arctic LNG 2 liquefied natural gas (LNG) project, the Sankei newspaper reported on Tuesday, citing several sources, in yet another blow for the project.

Fearing the backlash from the sanctions, foreign shareholders suspended participation in the project, renouncing their responsibilities for financing and for offtake contracts for the plant, the daily Kommersant reported on Monday.

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

Following are some facts about the Arctic LNG-2 project:


Plant


The plant is located on the Gydan Peninsula in the Arctic and will have three operational lines with a capacity of 6.6 million metric tons of LNG each.

Novatek, Russia's largest LNG producer, plans to start production by the end of this year. The second and third lines are due to start operations in 2024 and 2026 respectively.

Arctic LNG-2 would be Russia's third large-scale project for producing LNG after a Gazprom GAZP.MM-led Sakhalin 2 plant in Russia's Pacific and Yamal LNG controlled by Novatek.

Shareholders

Arctic LNG-2 is led by Novatek which holds a 60% stake. Other shareholders include French energy major TotalEnergies, China's CNPC and CNOOC as well as Japan Arctic LNG - a consortium of Mitsui & Co and JOGMEC - each holding a 10% stake.

Investors will be able to sell LNG in accordance with their shares. Novatek will have the right to sell 11.9 million tons of LNG per year from the project. Other shareholders will be able to sell around 2 million tons each.


Investments


Investments are valued at up to $21 billion. Novatek had initially planned to raise some 9.5 billion euros ($10.11 billion) in project financing from both Russian and foreign banks.

But after Moscow started what it calls its special military operation in Ukraine in February 2022, international banks and shareholders halted financing due to sanctions.


LNG Contracts


Arctic LNG-2 has a license for LNG exports from Russia. As of early November, according to public information, Novatek has secured 4.3 million tons of LNG sales per year.

Novatek and India's Deepak Fertilisers and Petrochemicals Corporation signed a non-binding memorandum of understanding (MoU) on the supply of LNG and low-carbon ammonia in February 2023. No sales volumes have been disclosed.

In January 2022, Novatek signed a deal with China's ENN Natural Gas to supply around 0.6 million tons of LNG per year for 11 years.

In June 2021, Novatek and Glencore signed an agreement on long-term LNG supplies of 0.5 million tons per year to terminals in Eastern Asia.

In June 2021, Novatek and China's Zhejiang Provincial Energy Group signed an agreement, which built on an MoU signed in October 2019 and established key commercial terms for annual supply of up to 1 million tons of LNG from the Arctic LNG-2 project for a term of 15 years.

In February 2021, Novatek Gas & Power Asia agreed with China's Shenergy Group to supply about three million tons of LNG over a duration of 15 years, or about three LNG cargoes a year.

In April 2019, Novatek and Vitol signed an agreement which may result in a 15-year deal on supplies of 1 million tons of LNG per year.

In April 2019, Novatek and Repsol signed an agreement, which may open up the possibility for a 15-year deal on supplies of 1 million tons of LNG from Arctic LNG 2 and other Novatek projects.


(Reuters - Reporting by Oksana Kobzeva; Writing by Vladimir Soldatkin; Editing by Andrew Osborn and Alexander Smith)

Categories: LNG Industry News Activity Arctic Europe Asia

Related Stories

VARD Snags $125M Shipbuilding Deal for Subsea Construction Vessel

MODEC and Samsung Team Up to Install Carbon Capture Tech on FPSO

Petronas to Retain National Authority After Sarawak Gas Deal

Petronas Greenlights Hidayah Field Development Off Indonesia

BP Targets 44% Oil, 89% Gas Increase from India’s Mumbai High Field

ADES’ Fourth Suspended Jack-Up Rig Gets Work Offshore Thailand

Vestas Lands First 15MW Offshore Wind Turbine Order in Asia Pacific

Shell Shuts Down Oil Processing Unit in Singapore Due to Suspected Leak

Pharos Energy Extends Licenses for Two Vietnamese Gas Fields

China’s CNOOC Brings Bohai Sea Oil Field On Stream

Current News

China's ENN, Zhenhua Oil Ink LNG Supply Deals with ADNOC

MODEC Wins ExxonMobil Guyana’s Hammerhead FPSO Contract

Mitigate SCC & HE to Keep Offshore Metal Structures Ship Shape

India Stretches Bids Deadline for 13 Offshore Deep-Sea Mineral Blocks

Indonesia Awards Oil and Gas Blocks to Boost Reserves

Sapura Energy Nets $22.6M in Offshore Support Vessel Contracts

CNOOC Puts Into Production New Oil Field in South China Sea

Sunda Energy Starts Environmental Consultation for Chuditch-2 Well Drilling Plans

Pakistan’s OGDC to Start Production at ADNOC’s Offshore Block by 2027

Petrovietnam, Petronas Extend PSC for Offshore Block

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com