The massive $27 billion Yamal LNG liquefied-natural-gas venture in the Arctic Circle, a centerpiece of President Vladimir Putin’s plan for Russia has been squeezed by U.S. restrictions on OAO Novatek, says a report in the WSJ.
Through this project, Russia wants to reduce its heavy dependence on natural-gas customers in Europe by increasing exports to Asia and, in turn, cementing Russian ties with China.
Barred by the sanctions from raising long-term dollar loans, Novatek and its foreign partners, Total SA of France and China National Petroleum Corp., are having to seek more money from Chinese lenders than they had intended, in addition to kicking in nearly $10 billion of their own, according to company executives. But they have, so far, failed to secure the $15 billion or so they need to complete the project.
Meanwhile, Novatek has decided to sell 9.9 percent of its Yamal LNG project to a Chinese investment fund, helping the sanctions-hit company to replace western financing.
"Being one of the largest importers of oil and gas, China is interested in participating in the production of these resources and investing in this sector," said Alexander Krasnov, analyst at Verum Optium.
However, experts believe that the U.S. sanctions may still impede the realization of LNG projects in Russia.
The Yamal LNG project requires the construction of an LNG plant in the Yuzhno-Tambeiskoye deposit in the north of Russia and also includes the launch, in 2017, of three LNG lines with a power capacity of 5.5 annual tons.
Overall investments are estimated at $28 billion, with the largest shareholders in the project currently Novatek (60 percent), French oil and gas giant Total (20 percent) and China’s CNPC (20 percent).