25 Nov 2014 – Societe Generale, and the legal firms White & Case and Latham & Watkins have relinquished their advisory roles on the USD 27bn Yamal LNG project in Russia, as a result of sanctions imposed by the United States, a banking source and a sector banker said.
Clifford Chance has recently been hired in place of the legal firms, and the project is searching for new financial advisors, the banking source and the sector banker added. Clifford Chance did not respond to a request for comment.
Latham & Watkins and White & Case are headquartered in the US so they have to be much more nervous about the Russian sanctions than a British-based firm such as Clifford Chance, since Clifford Chance would be subject to a different sanctions regime, a lawyer claiming familiarity with the situation said. However, since Clifford Chance is incorporated in the US it is in a similar position as White & Case to advise, a second lawyer said.
Yamal’s 60% shareholder Novatek, Russia’s second largest gas producer and its co-owner Gennady Timchenko, are on the US sanctions list. The sanctions apply to any subsidiaries that are more than 50%-owned by a Russian firm that is subject to sanctions, which includes Yamal. French Total holds 20%, and China’s CNPC a 20% stake in Yamal LNG.
Total has deprioritised Yamal, in light of the sanctions, and will instead focus on progressing its Gladstone LNG project in Australia, this news service reported earlier this month.
Securing an international bank as a new financial advisor will prove challenging, a Moscow-based banker, the sector banker and the lawyer noted. Many of the banks have stopped project financing practice, the Moscow-based banker said. The main Western European banks that still practice project finance are Societe Generale, BNP Paribas, ABN AMRO and ING, the source and the Moscow-based banker said. French banks, however, are unlikely advisory candidates for Yamal following BNP Paribas USD 8.9bn fine for violating US sanctions earlier this year, the source said.
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.
White & Case declined to comment.
Novatek, Societe Generale, Latham & Watkins did not respond to requests for comment.
by Katie McQue in London