Novatek rejects US sanctions on its Artic LNG 2 project: they only serve to keep prices high
Russia's Novatek has rejected sanctions against its Arctic LNG 2 project, imposed by Washington last week, as a desperate attempt to keep international gas prices high, Interfax reported on Monday. The sanctions are important because a portion of the project is in the hands of Western companies.
Novatek, founded by Leonid Mikhelson, is the largest private Russian group in the gas sector; its founder and its partnership with France's TotalEnergies have been under scrutiny since Russia's invasion of Ukraine.
Interfax quoted Mikhelson as describing the US sanctions as “high praise for our professionalism” and that they were designed to benefit North American LNG operators seeking to push up prices. The $25 billion Arctic LNG-2 project is Russia's second major LNG project, and the new sanctions ban all related transactions without a special license from OFAC until January 31, 2024.
The full extent of the sanctions is not yet clear, so much so that TotalEnergies said it is assessing their impact. Novatek holds a 60% stake in the project, while TotalEnergies and Chinese companies CNPC and CNOOC each hold 10%, plus 10% from a separate consortium made up of Japan's Mitsui and JOGMEC. TotalEnergies also owns a further 21.% of the project through its Novatek shareholding. Long-term supply contracts are now under discussion, as is the future financing of the project.
“The consequences of the designation of Arctic LNG 2 as an SDN entity by US authorities on TotalEnergies' contractual commitments to Arctic LNG 2 are currently being assessed,” a TotalEnergies representative told Reuters . TotalEnergies took $14.8 billion in asset writedowns related to operations in Russia in 2022, as well as a $4.1 billion writedown in the first quarter of 2022 for the Arctic LNG-2 project.
The new sanctions against Novatek come as Putin confirmed Monday that he will officially run in the 2024 elections, seeking his fifth term, according to a Reuters report citing anonymous sources. So they can be seen as more of a political move than an economic one.
Furthermore, this decision puts both Total and the Japanese companies that were banking heavily on this LNG project in great difficulty.
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The article Novatek rejects US sanctions on its Artic LNG 2 project: they only serve to keep prices high comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/novatek-respinge-le-sanzioni-usa-sul-suo-progetto-artic-lng-2-servono-solo-a-tenere-i-prezzi-alti/ on Tue, 07 Nov 2023 10:00:18 +0000.