LNG

French energy major TotalEnergies said it was assessing the possible impact of US sanctions on the Arctic LNG II project on the Gydan Peninsula of northern Russia in which it has a direct 10 percent stake and a total interest of 21.5 percent via its shareholding in Russian natural gas company and LNG developer Novatek.

TotalEnergies was a leading player in two Arctic LNG joint ventures and a shareholder in the Novatek company itself as well in the existing Novatek-operated Yamal LNG plant, though announced last year it was looking for ways to pull out after Russia invaded Ukraine in February 2022.

In contrast with other global energy majors like Shell and ExxonMobil Corp. that have cut ties with Russia after its invasion of Ukraine, the French company has held on to several investments, including minority stakes in Yamal LNG and Arctic LNG II.

Before the latest sanctions imposed on November 2 by the US on Russia over the Ukraine invasion, TotalEnergies had said it would honour its gas contracts in Russia as long as there were no sanctions involved.

Consequences

“The consequences of the designation of Arctic LNG 2 as a SDN (special designated nationals) entity by the US authorities on TotalEnergies' contractual commitments to Arctic LNG II are currently being assessed,” said TotalEnergies

The company had previously said in March 2022 it had decided to no longer book proved gas reserves for the Arctic LNG II project nor contribute any more investment capital to the project, which is scheduled to come onstream in the first quarter of 2024.

TotalEnergies booked an impairment of $4.1 billion in its first-quarter earnings of 2022 for Arctic LNG II out of a total of $14.8Bln in Russia-related asset write-downs for all of 2022.

Novatek Chairman Leonid Mikhelson has pledged to bring the Gydan Peninsula liquefaction and export plant on stream in early 2024.

Two liquefaction Trains have already been installed on gravity-based platforms at an LNG assembly yard in the town of Belokamenka in the Murmansk region and have been towed to the site.

Each liquefaction Train installed on the platforms will have production capacity of 6.6 million tonnes per annum to total almost 20 MTPA in nameplate capacity.

During the first half of 2023 a total of over 80 gas wells were completed at the Utrenneye gas field to provide feed gas for Arctic LNG II.

All three liquefaction Trains at the Arctic LNG II plant were originally scheduled to come on stream in a two-year time span from 2023, though issues with the supply of technology have delayed the start-up.

Basic LNG modules were constructed in China for the liquefaction Trains and the first was delivered back in September 2021 to the Murmansk assembly site.

China modules

The modules were built at the Wison shipyard at Zhoushan in the eastern Chinese province of Zhejiang.

The first Chinese module was delivered to the Murmansk yard in September 2021, five months before the Ukraine invasion.

Novatek controls 60 percent of the Arctic LNG II project and its other remaining active partners out with TotalEnergies are from China and Japan.

They are China National Petroleum Corp., China National Offshore Oil Corp. and a consortium comprising Japanese companies, including Japan's Mitsui & Co. and the Japan Organization for Metals and Energy Security, previously known as JOGMEC.

All the shareholders in the project will have offtake. The biggest shareholder Novatek signed sales and purchase agreements in 2022 with two Chinese energy companies, ENN Group and Zhejiang Energy Gas Group.

The Russian company's subsidiary, Novatek Gas and Power Asia, signed a deal with ENN’s trading firm ENN LNG (Singapore) Ltd.

LNG deliveries to ENN will be on a delivered ex-ship (DES) basis whereby Novatek supplies the shipping to ENN’s Zhoushan LNG receiving terminal in eastern China.