Restrictions on the Arctic LNG 2 energy project endanger vital fuel supplies, according to Chinese energy majors

China’s state energy majors CNOOC and China National Petroleum Corp (CNPC) have both asked the US government for exemptions from sanctions on a new Russian liquefied natural gas (LNG) export plant. They are seeking to prevent disruption to crucial fuel flows, Reuters reported on Friday, citing people with direct knowledge of the matter.

The Arctic LNG 2 energy project, which is located on the region’s Gyda Peninsula, is operated by Russia’s largest independent LNG producer, Novatek. It will feature three LNG trains, with a total annual production capacity of 19.8 million tons. The first train was launched in July, while the remaining two are scheduled to commence in 2024 and 2025.

The US Treasury Department’s Office of Foreign Assets Control (OFAC) imposed sanctions on the Russian gas enterprise in early November, banning third countries in Asia and Europe from purchasing LNG produced by the plant when it starts operating in 2024.

“This is a standard response as an equity partner communicating with OFAC to protect our interest in the project,” a Beijing-based industry official told the outlet. China is the world’s biggest buyer of LNG, and US sanctions threaten deliveries that are considered vital for heating homes and fueling the industry in the country. 

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CNOOC and CNPC each have a 10% stake in the Arctic LNG 2 plant, while Novatek has a 60% holding. France’s TotalEnergies and Japan Arctic LNG, a consortium involving Mitsui & Co and JOGMEC, are two other shareholders, each with a 10% stake. Former Japanese Economy Minister Yasutoshi Nishimura warned earlier that sanctions on the project could have a major negative impact on business in Japan. Tokyo had previously exempted Russian LNG projects in Sakhalin and the Arctic from sanctions and continued to provide architectural and engineering services for the projects.

Meanwhile, the start of exports from the Arctic LNG 2 project is at risk of being delayed after Novatek sent force majeure notifications on shipments to some of its buyers following the US sanctions, the outlet noted.

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