By Yuka Obayashi and Liz Lee
TOKYO/BEIJING/SEOUL (Reuters) -Japan’s Mitsui and Co has decided to pull its employees out of Russia’s Arctic LNG 2 liquefied natural gas (LNG) project, the Sankei newspaper reported on Tuesday, citing several sources, in yet another blow for the project.
At the same time, Mitsui’s joint venture with Japan’s JOGMEC is expected to retain its stakes in the Arctic LNG 2, the report said. Mitsui declined to comment, while JOGMEC was not immediately available for comment.
Arctic LNG 2, located on the Gydan peninsular north of the Arctic circle, is a key element in Russia’s strive to boost its global share on the global liquefied natural gas market to 20% by 2030 from 8% now.
It’s also a part of Russia and China’s ‘no limits’ partnership, developed as Moscow has been diverting its vast energy resources from Europe to the commodity-hungry Asia amid Western sanctions against the Kremlin over the conflict in Ukraine.
It has already faced difficulties due to U.S. sanctions and a lack of gas carriers.
Fearing the backlash from the sanctions, foreign shareholders suspended participation in the project, renouncing their responsibilities for financing and for offtake contracts for the plant, the daily Kommersant reported on Monday.
China’s state oil majors CNOOC Ltd and China National Petroleum Corp (CNPC) each have a 10% stake in the project, which is controlled by Novatek, Russia’s largest LNG producer and owner of a 60% stake in the project.
France’s TotalEnergies and a consortium of Japan’s Mitsui and Co and JOGMEC also have a 10% stake each.
With three trains, Arctic LNG 2’s capacity is meant to be 19.8 million metric tons per year and 1.6 million tons per year of stable gas condensate. Its first LNG tankers were expected to set sail in the first quarter of next year, according to Novatek.
But industry sources say that commercial LNG supplies from the project are now expected no earlier than the second quarter of 2024.
Sanctions have also resulted in Novatek declaring force majeure over LNG supplies from the project, industry sources told Reuters last week.
The European Union may also impose restrictions on Russia’s LNG supplies.
A Beijing-based industry official with direct knowledge of the matter told Reuters last week that CNPC and CNOOC have both asked the U.S. government for exemptions from sanctions on Arctic LNG 2.
On Tuesday, China unleashed its criticism against the U.S.’ sanctions over Arctic LNG 2.
Economic cooperation between China and Russia was in the mutual interest of both countries and “should not be interfered with or restricted by any third party,” Chinese foreign ministry spokesperson Mao Ning said at a regular press conference.
“China has always opposed unilateral sanctions and long-arm jurisdiction without the basis of international law,” she added.
In another impediment for the project, South Korea’s Samsung Heavy Industries said on Tuesday it has not started making blocks and equipment for 10 out of 15 Arctic LNG carriers contracted with Russian Zvezda shipyard.
It added that it still has been delivering blocks and equipment for five of them to Zvezda.
(Reporting by Yuka Obayashi and Kaori Kaneko in Tokyo, Liz Lee and Andrew Hayley in Beijing, Joyce Lee in Seoul; Writing by Vladimir Soldatkin; Editing by William Maclean)