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Russian Novatek has dismissed 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.
Novatek, founded by Leonid Mikhelson, is Russia’s largest private gas group, and its founder, and its partnership with French TotalEnergies (NYSE:TTE) has been under scrutiny since Russia’s invasion of Ukraine.
Interfax quoted Mikhelson as describing U.S. sanctions as “high praise for our professionalism” and designed to benefit North American LNG players looking to drive prices higher. The $25-billion Arctic LNG-2 project is Russia’s second major LNG project, and the new sanctions prohibit all related transactions without a special license from OFAC until 31 January 2024. The full scope of the sanctions remains unclear, sparking a statement from TotalEnergies that it is currently assessing the impact. Novatek has a 60% interest in the project, with TotalEnergies and Chinese companies CNPC and CNOOC each holding 10%, along with 10% for a separate consortium of Japan’s Mitsui and JOGMEC. TotalEnergies also owns an additional 21.% in the project through its shareholding Novatek. Long-term supply contracts are now in question, as is future financing of the project.
“The consequences of the designation of Arctic LNG 2 as an SDN entity by the US authorities on TotalEnergies’ contractual commitments to Arctic LNG 2 are currently being assessed,” a representative for TotalEnergies was quoted as saying by Reuters.TotalEnergies has suffered $14.8 billion in asset writedowns related to Russia operations in 2022, in addition to a $ 4.1 billion Q1 2022 impairment for the Arctic LNG-2 project. New sanctions on Novatek come amid confirmation on Monday that Putin will officially run for president in 2024 elections, gunning for his fifth term, according to a Reuters report citing anonymous sources.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com