China Seeks Relief from US Sanctions Impacting Russian LNG Facility

Both CNPC and CNOOC, major state-owned oil companies in China, have formally requested exemptions from US sanctions imposed on a new Russian liquefied natural gas (LNG) export plant.

The Arctic LNG 2 project, primarily controlled by Russia's leading LNG producer Novatek, has both CNOOC Ltd and China National Petroleum Corp (CNPC) holding a 10% stake each in the venture. Novatek retains a majority 60% stake in the project.

The source, who opted for anonymity due to the confidential nature of the matter, described the request as a routine step taken by equity partners to safeguard their interests in the project. The communication was directed to the Office of Foreign Assets Control (OFAC), a division under the US Department of the Treasury. As of now, the OFAC has yet to provide a response.

The US recently implemented comprehensive measures against Russia, including sanctions targeting entities involved in the development, operation, and ownership of the Arctic-2 LNG project in Siberia.

There is concern that LNG vessels may face repercussions from US sanctions if they obtain fuel from Arctic LNG 2. CNOOC and CNPC also procure LNG from the United States and are keen on avoiding any disruption to their supply from American projects.

Novatek has issued force majeure notifications to certain clients regarding future supplies from Arctic-2. The project is slated to commence production either by the end of this year or in early 2024. It holds strategic significance for Russia's ambitions to elevate its share of the global LNG market to 20% by 2030, compared to the current 8%. The inaugural LNG tankers from the project were anticipated to set sail in the first quarter of the upcoming year.

France's TotalEnergies and Japan Arctic LNG, a consortium comprising Mitsui & Co and JOGMEC, also possess a 10% stake each in the project. Japan, heavily reliant on LNG as a transitional fuel on its path to carbon neutrality by 2050, had previously asserted its commitment to ensuring its supplies remain unaffected by the sanctions, although it acknowledged an "inevitable" degree of impact.

The US State Department had indicated back in November that it was collaborating closely with partner countries to navigate the complexities of imposing sanctions on the Arctic LNG 2 project.