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China To Seek Rare Exemption from Sanctions on Russia’s Latest LNG Project

Chinese state energy giants plan to ask the United States for exemptions from the fresh sanctions on Russia’s Arctic LNG 2 project in a rare request to the U.S. as LNG deliveries could be threatened, Bloomberg reported on Friday, citing sources familiar with the issue.

The U.S. imposed last month fresh sanctions on Russia’s Arctic LNG 2 project, which is close to first production. 

The Arctic LNG 2 project is being developed by Russia’s largest independent natural gas producer, Novatek, and was on track to begin first production later this year.  

Novatek holds a 60% stake in Arctic LNG 2. The other shareholders include CNOOC of China and China National Petroleum Corporation (CNPC), French supermajor TotalEnergies, and Japanese firms Mitsui Group and Jogmec.   

In September, the U.S. levied some sanctions on the Arctic LNG 2 project, designating Russian services companies connected with its development.

Two months later, the U.S. Department of State designated limited liability company ARCTIC LNG 2, the operator of the Arctic LNG 2 Project, as part of additional sanctions against Russia “to further target individuals and entities associated with Russia’s war effort and other malign activities.” 

The $25-billion Arctic LNG-2 project is Russia’s second major LNG project, and the new U.S. sanctions prohibit all related transactions without a special license from OFAC until 31 January 2024. 

Now CNOOC and CNPC are preparing to apply for sanctions exemptions to buy cargoes from Arctic LNG 2, to make sure that they don’t run afoul of the U.S., from which the Chinese firms also buy LNG, according to Bloomberg’s sources.  

Earlier this week, unnamed industry sources told Reuters that Novatek had issued force majeure on future Arctic LNG 2 supplies for some clients following the sanctions imposed by Washington in November. 

A Chinese request for exemptions from sanctions would be a rare occurrence for the world’s top crude oil and LNG importer, which has been importing oil from Iran, Venezuela, and Russia despite Western sanctions on the exports of those countries.    

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By Tsvetana Paraskova for Oilprice.com

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