Biggest Arctic Gas Project Seeks Route Around US Sanctions

Biggest Arctic Gas Project Seeks Route Around US Sanctions
Biggest Arctic Gas Project Seeks Route Around US Sanctions

Total SA and its partners will use a record 16 ice-breaking tankers to smash through floes en route to and from the Arctic’s biggest liquefied natural-gas development.

They’re still looking for a way around a freeze in US financing, according to Bloomberg.

With 22 wells drilled, and a runway and harbor built for the $27 billion project in Russia’s Yamal Peninsula, where temperatures can reach 50 degrees below zero Celsius, Total, OAO Novatek  and China National Petroleum Corp. have little choice but to push ahead.

The US Export-Import Bank this year halted a study into funding the plans to ship gas from Yamal, or End of Earth in the native Nenets tongue, to buyers around the world as President Barack Obama’s administration imposed sanctions on Russia. The action by the bank, which offers credit assistance to companies buying the nation’s goods and services, effectively blocked the project from borrowing in the US currency. “The issue is in the financing because this can’t be done in dollars,” Arnaud Breuillac, Total’s president of exploration and production, said in an interview. “It’s more complex. We are working on it.”

The US and Europe have mostly targeted the Russian oil industry and individuals with ties to President Vladimir Putin rather than impose measures that could strangle the nation’s gas exports. Russian gas output will decline about 4 percent this year, and exports, excluding transit of Central Asian supplies to Europe, will fall 6.7 percent, Russian Energy Minister Alexander Novak told reporters Tuesday.

One option for Paris-based Total is to look for help from home. Coface SA  is France’s answer to the US Exim bank. “We’ll get it in other currencies such as euros through credit agencies like Coface,” Breuillac said.

Total has said it’s no longer counting on output from Yamal LNG in its 2017 production target. Commissioning of the first LNG unit, or train, was to begin in 2016 and commercial production the following year.

Novatek executives including CEO Leonid Mikhelson and co-owner Gennady Timchenko, who is on a sanctions list, have since said they hope to receive more than $10 billion from Chinese banks in a deal that could be reached by the end of the year.

Total has also raised the possibility of backing from other European export-credit agencies, as well as ruble financing.

Novatek, Russia’s second-largest gas producer, has requested $2.7 billion to finance Yamal from the country’s rainy-day Wellbeing Fund. Designed to produce as much as 16.5 million metric tons of LNG a year on the peninsula at the Ob River estuary, Yamal is central to Total’s plans to boost output and Russia’s bid to export more of the fuel.