US opposes Russia's Arctic LNG 2 project 'coming online'

The US is opposing Russia's Arctic LNG 2 project "coming online," a State Department spokesperson told S&P Global Commodity Insights just hours after the country's sanctions waiver for winding down transactions involving the project company expired on Jan. 31.

"We oppose the Arctic LNG 2 project coming online, as it is meant to significantly expand Russia's LNG production and export capacities, an expansion we have committed to blocking," the State Department spokesperson said.

"We are committed to degrading Russia's ability to expand its future energy production and export capacities."

Russia's Novatek, which has a 60% stake in Arctic LNG 2, planned to begin LNG production at the first of three 6.6 million mt/year trains before the end of 2023 and to ramp up output through the first quarter of 2024.

The State's comments came as several licenses from the US Treasury's Office of Foreign Assets Control that allowed the winding down of transactions involving the project company expired at 12:01 am ET (0501 GMT) on Jan. 31.

The Treasury did not respond to a request for comment by S&P Global on the expiry of the general licenses.

OFAC imposed sanctions on the Arctic LNG 2 project company on Nov. 2, 2023, as part of a raft of restrictions targeting "individuals and entities" associated with Russia's war effort in Ukraine as the White House sought to put more pressure on Moscow over the conflict.

OFAC had designated Arctic LNG 2 among Specially Designated Nationals, which is a blacklist of entities that are linked to targeted countries and whose assets are blocked from conducting any transactions with US entities.

"Along with the designation of Limited Liability Company Arctic LNG 2, OFAC also issued General License 76A, authorizing the wind-down of transactions involving the project company, and any entities owned 50% or more by the company, through Jan. 31, 2024," the State Department spokesperson said.

"Through all our sanctions designations, we maintain close coordination with our partners, and we will continue to do so moving forward," the spokesperson added.

The remaining Arctic LNG 2 shareholders comprise France's TotalEnergies (10%), China's CNPC (10%), China's CNOOC (10%) and Japan Arctic LNG with the final 10% stake.

Japan Arctic LNG BV, or J-Arc, is a Dutch corporation 75% owned by state agency Japan Organization for Metals and Energy Security, or JOGMEC, and 25% by Mitsui.

A Japanese government official said Feb. 1 that Tokyo intends to respond appropriately in concert with the G7 as it still sees the Arctic LNG 2 project as important for domestic and global stable energy supply.

Energy security was among the key factors when the G7 decided in May 2022 to phase out Russian energy, including oil, "in a timely and orderly fashion," while ensuring "stable and sustainable global energy supplies and affordable prices for consumers."