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by Vladimir Soldierkin
MOSCOW, Dec 25 (Reuters) – Foreign shareholders in Russia’s Arctic LNG 2 liquefied natural gas (LNG) project have suspended their shares due to sanctions against Moscow and divested themselves of responsibility for financing and contracting and removing LNG, reported the daily Kommersant on Monday.
This project is a key element of Russia’s strategy in the global LNG market, where the country aims to increase its market share from 8% to 20% by 2030.
The United States imposed sanctions last month on the Arctic LNG 2 project, which was expected to begin production later this year or in early 2024.
France’s TotalEnergies, Chinese state-owned companies CNOOC and China National Petroleum Corp (CNPC), and a consortium of Japanese companies Mitsui and Co and JOGMEC – each holding a 10% stake – have declared force majeure over their participation in the project. Kommersant reported, citing Russian government sources.
The project is controlled by Novatek, Russia’s largest LNG producer with a 60% stake.
Novatek, CNOOC, JOGMEC and Total did not immediately respond to requests for comment. CNPC and Mitsui declined to comment. .
According to the daily, the suspension of participation could result in Arctic LNG 2 losing its long-term LNG supply contracts, while Novatek will have to finance the project itself and sell the gas on the spot market.
The initial investment in the Arctic LNG 2 project was $21 billion. The project was already struggling to raise funds after the West imposed sanctions on Russia.
The sanctions also led Novatek to notify some of its customers of force majeure regarding future LNG supplies from Arctic LNG 2, industry sources told Reuters last week.
The European Union could also impose restrictions on LNG supplies from Russia.
A Beijing-based industry official with direct knowledge of the matter told Reuters last week that CNPC and CNOOC had both asked the U.S. government for exemptions from sanctions on Arctic LNG 2.
Production is expected to begin in early 2024 and the first LNG tankers are expected to set sail in the first quarter of that year, Novatek said.
However, industry sources say commercial LNG deliveries are now not expected until the second quarter of 2024 at the earliest.
A force majeure event may occur if a supplier is unable to supply its customers due to circumstances beyond its control. In this case, he must inform the other party and give him an explanation. (Reporting by Lidia Kelly in Melbourne and Vladimir Soldierkin in Moscow, with contributions from Andrew Hayley in Beijing; French version by Kate Entringer)
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