The Japan Bank for International Cooperation (JBIC) has suspended funding for Russian gas producer Novatek’s major Arctic LNG project, adding yet further strain to a development that has been hard hit by western sanctions.
In late 2021, the Arctic LNG 2 project secured a bumper financing package worth €9.5bn from a group comprised of Chinese and Russian banks, as well as international lenders including the Japanese export credit agency (ECA) .
JBIC agreed in November to provide project financing worth up to €1.7bn, which the agency said would bolster energy transition efforts, grow LNG value chains across Asia and secure “important energy resources” for Japan.
But this week, a JBIC spokesperson tells GTR that the state lender has paused disbursement under the loan agreement, having conducted a comprehensive review of its involvement in Russian projects since the outbreak of war in Ukraine.
“We have been assessing the situation around each project on a daily basis while paying close attention to the situation of sanctions against Russia in each country including Japan, the United States and Europe, and countermeasures by the Russian government,” they add.
Up until Russia’s invasion of Ukraine, the Arctic LNG 2 mega-project was slated to go operational by 2023 and was aiming to build three LNG trains and infrastructure to liquefy natural gas extracted in the Arctic, before transporting it all the way to Europe and Asia.
Novatek is the lead developer and owns a 60% stake, while French company Total, PetroChina, CNPC and a consortium owned by Japanese firms Mitsui and Jogmec hold a 10% share each.
Total previously estimated that as much as 7 billion barrels of oil equivalent could be produced from the reserve, enough to help a country such as France meet its gas needs for 27 years.
But western buyers have been increasingly rejecting Russian energy products in recent months, while European policymakers have unveiled plans to slash their dependency on Moscow’s oil and gas imports by 2023.
Punitive measures imposed by the west on Russia have also had a direct impact on the Arctic LNG 2 project and caused uncertainty for private backers and suppliers.
Total announced in its Q1 results in April that it would record the project as a US$4.1bn impairment in its accounts, citing the impact of EU sanctions prohibiting the export of LNG technologies benefitting a Russian company.
Total also ruled out any fresh capital for developing projects in Russia and is now working to end its activities related to Russian oil and petroleum products.
At the same time, sanctions have caused difficulties in nations friendly with Moscow, with Upstream reporting in May that Chinese yards had halted work on modules for the Novatek-led Arctic LNG 2 project due to EU levies on Moscow.
JBIC’s chief previously warned that Japan would need to change its stance on energy projects in Russia in the wake of the Ukraine crisis, as reported by Reuters in early March.
“Russia’s act is an outrageous use of force to change the post-war order… it would not be right for Japan alone to act as if nothing had happened,” Tadashi Maeda, governor of state-owned JBIC, reportedly told a news conference.
But there are signs Tokyo will continue to pump cash into other fossil fuel projects in Russia and keep imports from them flowing.
As reported by Reuters in mid-April, Japan industry minister, Koichi Hagiuda, said the country intends to retain its concessions in the Sakhalin 1 oil and gas development, as well as the Sakhalin 2 LNG project, despite them being on Russian soil.
British multinational Shell said it would exit Gazprom’s Sakhalin 2 LNG development in early March, yet Japanese companies Mitsui & Co and Mitsubishi Corp, which hold 12 and 10% stakes in the project, have made no such commitment.
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