Chinese companies ‘shut down Russian Arctic LNG 2 project’ due to EU

At least five Chinese companies will have to suspend work on Russia’s Arctic LNG 2 project in northern Siberia by the end of this month, according to an industrial publication, due to EU sanctions against Moscow over its attack on Ukraine.

But a Chinese man made the statement South China Morning Post That it remains “in close contact with the parties concerned” because the situation is “changing every day”.

“There is no final word yet,” said a source at Tianjin-based Bomesk Offshore Engineering, which is developing 10 modules for the Arctic LNG 2 project.

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Bomesc and other Chinese yards – including Cosco Shipping Heavy Industry, Penglai Jutal Offshore Engineering, Wison Offshore Engineering and Qingdao McDermott Wuchuan – are involved in making modules for three liquefaction trains or two production lines of the huge gas project.

Five Chinese companies did not immediately respond to inquiries.

They are building modules for Technip Energy, the French oil and gas company has awarded engineering, procurement and construction contracts for the Novatek project.

But according to a May 10 report by Norwegian-based energy industry publication Upstream, the European Union’s ban has prompted Chinese yards to suspend work on modules for the project’s third train by April 29 and work on the second train by May 27. Against Russia.

Citing sources, the report further said that there is uncertainty over the transportation of some finished units from China to Russia.

“These two modules are ready for loadout for Train 2, although there is some uncertainty about the timing,” an official, who is familiar with Wison’s Arctic LNG 2 schedule, was quoted as saying.

Technip chief executive Arnold Pitton had earlier warned that sanctions could affect the project.

“European sanctions now directly target LNG products and technologies and services, I would say, to make it effective. [Arctic LNG 2] More complex, perhaps even more complex, ā€¯Pitton said during an earnings call last month.

The United States and the European Union have imposed unprecedented sanctions on Russia in a bid to force President Vladimir Putin to end the war in Ukraine – including export bans on products and technologies related to its energy industry. Under the Fifth Round ban, European companies have a strict deadline of May 27 to end any outstanding deliveries.

Although Beijing has formally rejected calls for Russia to join Western-led sanctions, there is growing concern in China that its companies – especially those that rely on Western technology or US dollar transactions – could also be targeted by the sanctions.

In recent years, Putin has sought to diversify energy exports, including more gas sales to Asia. The Arctic LNG 2 project is part of a plan aimed at liquefying natural gas extracted off the north coast of Siberia and supplying it mainly to East Asian countries such as China and Japan.

The planned total production capacity of Arctic LNG 2 is 19.8 million tons per year, and its first production line is expected to be operational in 2023.

In 2019, privately owned Russian gas producer Novatek agreed to sell a 10 percent stake in the project to two Chinese state-owned companies, CNOOC and CNPC. A Japanese consortium of French oil giants TotalEnergy and Mitsui & Co. each has a 10 percent stake.

This is the second Arctic energy mega project with which China is involved – the Yamal LNG project, in which CNPC has a 20 per cent stake, began shipping gas to China in 2019.

Novatek reports that the Arctic LNG 2 project is about 60 percent complete by December, with the first train about 78 percent complete. But last month, Novatek chief executive Leonid Michelson said its development was “strain” and that the company could no longer secure a project deadline.

The article was originally published in the South China Morning Post (SCMP), the most authoritative voice reporting in China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit SCMP’s Facebook Twitter Pages Copyright 2022 South China Morning Post Publishers Ltd. All rights reserved.

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