Japan sees US sanctions to have 'certain impact' on Arctic LNG 2 project: minister

Japan sees the latest sanctions imposed by the US on Russia's Arctic LNG 2 project, specifically targeting its operator, will inevitably "have a certain impact" on the project, Minister of Economy, Trade and Industry Yasutoshi Nishimura said Nov. 7.

"We see it is inevitable to have a certain impact on the project because the latest US sanctions target the [Arctic LNG 2] project main body unlike the previous measures in September," Nishimura told a press conference in Tokyo.

Nishimura's comments came as the US imposed sanctions on the Arctic LNG 2 project Nov. 2, part of a raft of restrictions targeting "individuals and entities" associated with Russia's war in Ukraine.

The latest sanctions came after the US had issued sanctions in September on two ships designed to serve as transshipment terminals for LNG cargoes from the Arctic LNG 2 project, which sector experts expected to create shipping bottlenecks for market participants, many of whom are Asian companies.

Nishimura said Japan sees the Arctic LNG 2 project, which has taken an investment decision before Russia's invasion of Ukraine, as "important" for the country's stable energy supply amid a tight supply and demand LNG market outlook in the foreseeable future.

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."

At the press conference, Nishimura said Japan will appropriately respond to the US sanctions after its scrutiny as well as through its cooperation with the G7, which Tokyo holds the current presidency.

"Together with relevant parties, we will have a detail scrutiny on the impact [from the US sanctions]," Nishimura said. "We will appropriately respond after comprehensively assessing [the situation] with our country's stable energy supply being unimpaired."

State-owned Japan Organization for Metals and Energy Security has a 75% stake in Japan Arctic LNG BV, or J-Arc, which holds a 10% stake in Arctic LNG 2 LLC, the operating company for the Arctic LNG 2 project in Russia. Mitsui holds the other 25% in J-Arc.

Novatek has a 60% stake in Arctic LNG 2, with the remaining shareholders comprising France's TotalEnergies (10%), China's CNPC (10%), China's CNOOC (10%).

Under a general license, the US Treasury's Office of Foreign Assets Control said Nov. 2 that all transactions necessary to divest or transfer debt or equity of Arctic LNG 2 LLC, a blocked entity, will be allowed until 12:01 am Eastern Standard Time, Jan. 31, 2024.

Under the general license, all transactions necessary to facilitating, clearing, and settling trades of covered debt or equity that were placed prior to 4:00 pm Eastern Daylight Time, Nov. 2, 2023 are authorized through 12:01 am EST, Jan. 31, 2024.

The Arctic LNG 2 operator sanctioned by the US, a subsidiary of Novatek, has targeted the first production from the 19.8 million mt/year capacity project by the end of 2023 and a ramp-up to design capacity in early 2024.

The Arctic LNG 2 project will have three production trains, each with a capacity of 6.6 million mt/year. The second and third trains are expected to be online in 2024 and 2026, respectively.