International investors pull out of Russia's Arctic LNG 2 project

 International investors pull out of Russia's Arctic LNG 2 project

International investors pull out of Russia's Arctic LNG 2 project

Due to US sanctions over the Ukraine war and a lack of gas carriers, the project—which is considered as a crucial component of Russia's effort to boost its LNG worldwide market share from 8% to 20% by 2030—is already encountering challenges. was facing.

On July 26, 2022, the concrete gravity-fed structure (GBS) of the Arctic LNG 2 joint venture is seen being built at the LNG production center's dry dock, close to the town of Belokamenka in the Murmansk area of Russia. Reuters/File Photo/Stringer

Due to sanctions, foreign investors have withdrawn from the Arctic LNG 2 project and given up on funding the new LNG facility in Russia as well as the offtake agreement, according to a story published in the newspaper Kommersant on Monday.

Due to US sanctions over the Ukraine war and a lack of gas carriers, the project—which is considered as a crucial component of Russia's effort to boost its LNG worldwide market share from 8% to 20% by 2030—is already encountering challenges. was facing.

The project is owned by Novatek, the biggest LNG producer in Russia, who also has a 60% share. China's state oil corporations, CNOOC Ltd and China National Petroleum Corp (CNPC), each have a 10% stake in the project.

According to Kommersant, which cited unidentified Russian government sources, the two Chinese businesses expressed astonishment at being included in the project, along with a group that included Japan's Mitsui & Co. and JOGMEC and France's TotalEnergies, each of which has a 10% interest. Event declared.

Requests for comment from Novatek, CNOOC, Jogmec, and Total were not immediately answered. Both Mitsui and CNPC refused to comment.

According to the publication, the suspension may force Novatek to fund the project on its own and sell the seaborne gas on the open market, while Arctic LNG 2 would lose its long-term contracts for LNG supplies.

$21 billion was initially invested in the Arctic LNG 2 project. It already had trouble generating money after Russia was sanctioned by the West.

As a consequence of the restrictions, Novatek has declared force majeure on LNG deliveries from the project, industry sources told Reuters last week.

Additionally, the EU may put penalties on Russia's LNG imports.

Last week, Reuters was informed by a Beijing-based industry person with firsthand knowledge of the situation that CNPC and CNOOC had requested an exemption from Arctic LNG 2 penalties from the U.S. government.

Arctic LNG 2 can produce 1.6 million metric tons of still gas condensate and 19.8 million metric tons of compressed gas annually with its three processing trains. The start of production is slated for early 2024.

According to Novatek, the first LNG ships were scheduled to launch in the first quarter of 2019.

However, industry sources state that it is currently not anticipated for the project to produce commercial LNG until the second quarter of 2024.