07 November 2014 – Total, Novatek and CNPC will not be able to complete the financing of the USD 27bn Yamal LNG project by year-end due to a difficult fundraising environment linked to sanctions against Russia, a source from Total told this news service.
“The sanctions will just prolong the financing process,” he said. “Total is in no hurry as there are other projects we are prioritising.”
The source said progress of the USD 18.5bn Gladstone LNG project in Australia, of which Total has a 27.5% share, would take precedence over Yamal.
The estimated cost of the Yamal project was USD 27bn when the FID was made in December last year. Novatek, the project operator, issued a memorandum in May, before the sanctions were installed, that stated its intention to complete the project’s financing by the fourth quarter of this year.
“Financing Yamal is hard,” Total’s new CEO Patrick Pouyanne said at the Oil & Money conference in London on 30 October. “It has to be done without US banks or US dollars. It’s difficult.”
The Yamal LNG project is situated in the Port of Sabetta, on the Arctic peninsula, North-East Russia. The project is anticipated to enable Russia to double its share of the global LNG market from 4.5%. It is expected to produce 16.5mtpa of LNG once fully operational, and it is targeted to start producing in 2017.
Total owns a 20% stake of the project. Novatek owns a 60% stake and China’s CNPC a 20% stake in Yamal LNG. Novatek is subject to US sanctions, and the sanctions apply to any subsidiaries in that are more than 50% owned, which includes Yamal.
By Katie McQue