Novatek has already taken precautionary measures by sending force majeure notifications to some clients over future supplies.
China National Petroleum Corp (CNPC) and CNOOC Ltd, state oil majors, have formally requested exemptions from U.S. sanctions on the Arctic LNG 2 project, a new Russian liquefied natural gas (LNG) export plant. Both CNPC and CNOOC hold a 10% stake in the project, which is primarily controlled by Novatek, Russia’s largest LNG producer with a 60% stake.
The request for exemptions was submitted to the Office of Foreign Assets Control (OFAC) under the U.S. Department of the Treasury, according to a Beijing-based industry official with direct knowledge of the matter. The official emphasized that this move is a standard response as equity partners communicating with OFAC to protect their interests in the project.
The U.S. imposed extensive sanctions on Russia last month in response to the ongoing conflict in Ukraine. The measures included sanctions targeting entities involved in the development, operation, and ownership of the Arctic LNG 2 project in Siberia. The sanctions have prompted Chinese firms to seek exemptions, anticipating potential repercussions on LNG vessels and fearing disruptions to their supply from American projects.
The request for exemptions reflects the delicate geopolitical balance involving major players in the energy sector and the global LNG market. Both CNPC and CNOOC purchase LNG from the United States, and any disruption in their supply chain could have broader economic implications.
Novatek, the majority stakeholder in the Arctic LNG 2 project, has already taken precautionary measures by sending force majeure notifications to some clients over future supplies. The project, set to commence production by the end of this year or early 2024, is a crucial component of Russia’s strategy to increase its share of the global LNG market from around 8% to a fifth by 2030.
France’s TotalEnergies and Japan Arctic LNG, a consortium of Mitsui & Co and JOGMEC, are also shareholders in the project with a 10% stake each. These international stakeholders are closely monitoring the situation, considering the potential impact of sanctions on the project’s development and global LNG supply dynamics.
While CNPC, CNOOC, and Novatek did not immediately respond to Reuters requests for comment, the request for sanctions exemptions highlights the complex interplay of economic interests, geopolitical considerations, and energy security in the evolving landscape of global energy markets.
The Arctic LNG 2 project has been a focal point in the U.S.-Russian geopolitical equation, with sanctions reflecting broader efforts to curtail Russia’s economic activities. Japan, another significant player in the project, had previously expressed its commitment to ensuring its LNG supplies were not adversely affected by sanctions.
The development adds to the ongoing discussions surrounding the broader impact of sanctions on global energy markets and underscores the intricate relationships between major energy players from different geopolitical spheres. As Washington continues to navigate the delicate balance of implementing sanctions while considering the global energy landscape, the outcomes will significantly influence the future trajectory of major energy projects and partnerships.