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2022-04-26 14:10:00

SANCTIONS FOR RUSSIAN LNG

SANCTIONS FOR RUSSIAN LNG

NGI - April 25, 2022 - European sanctions are having a “direct impact” to complete services for Russia’s Arctic LNG 2, a major liquefied natural gas (LNG) project in the Far North of the country, Technip Energies’ CEO said Monday.

Since Russia’s invasion of Ukraine in February, the European Union (EU) has imposed a series of sanctions. They include barring delivery of goods and technologies required for natural gas liquefaction.

Those bans in turn are impacting Technip’s services delivery for Arctic LNG 2, CEO Arnaud Pieton said during the first quarter conference call. Russia’s PAO Novatek late last year clinched funding for the 19.8 million metric tons/year project, which was approved in 2019.

The ban on delivering liquefaction goods and technologies “will naturally have a more direct impact on the future execution of the project,” Pieton told investors on the conference call.

The sanctions could create a “more complicated, maybe even highly complicated” outlook for the Arctic gas export project, he said. Technip’s involvement in Arctic LNG 2 is likely to be sharply cut beyond June.

Like many global oil and gas operators, Technip in March said it would end all new business in Russia following the invasion of Ukraine.

“Regarding Russia, we are committed to complying with all applicable laws and regulations, which includes current and future sanctions,” Pieton said. “Our priorities are to protect our people, and the interests of our company and shareholders.”

Nearly 40% of Europe’s gas is now delivered through Russian pipelines. However, the EU is working to end its dependence on Russia. The Arctic LNG 2 project was scheduled to ramp up the first of three trains in 2023. However, sanctions may put the kibosh on that timeline, Pieton said.

“In anticipation of the escalation of the European Union sanctions, we have been working with clients, partners and suppliers within the relevant contractual frameworks to take appropriate measures in connection with our activities in Russia, including Arctic LNG 2,” Pieton said.

“We expect that the balance sheet position of the project and the relevant contract protections will be sufficient to fulfill our various contractual obligations in compliance with applicable sanctions.”

Looking Beyond Russia
For Technip, “we expect our activity outside of Russia to progressively ramp up through 2022,” Pieton said.

The war has created “an exceptional change” in the LNG market outlook,” he noted. “The vast majority of Europe’s gas demand will, we think, have to come from LNG.”

Novatek owns a 60% stake in the project, with China National Offshore Oil Corp., China National Petroleum Corp., Japan Arctic LNG and TotalEnergies SE each holding a 10% share.

Technip, in a joint venture with Saipem SpA and Russia’s Nipigasm, last fall loaded, shipped and delivered the first modules for Arctic LNG 2’s Train 1.

Meanwhile,Technip’s project delivery in 1Q2022 contributed US$1.4 billion in revenue, including $477 million from Arctic LNG 2.

The company during 1Q2022 also reconfigured the organizational structure around four business lines. The changes were done in part to support the energy industry transition to lower carbon.

“The energy landscape has become more complex in recent months with an urgent energy independence agenda, notably in Europe,” Pieton said. “Despite near-term volatility in commodity and raw material prices, the attractiveness of LNG, an inherently flexible energy source, has improved and the market opportunity is accelerating.

“In addition, government policy is increasingly promoting faster adoption of energy transition technologies, and Technip Energies is playing a leading role in this market evolution.”

Net income rose year/year to $78 million from $47 million. Revenue, excluding the Russian projects underway, increased by 25% to $1.8 billion.

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Tags: SANCTIONS, RUSSIA, LNG, NOVATEK