France's TotalEnergies has declared force majeure on its participation in Russia's Arctic LNG-2

The French group TotalEnergies, one of the shareholders of the Russian liquefied natural gas project Arctic LNG-2, will not receive LNG from it in 2024, according to a press release from the company cited by RFI.

"We have declared force majeure in accordance with the existing contracts and will comply with the sanctions regime. Accordingly, we do not plan to receive LNG from the Arctic LNG-2 project in 2024," the text says.

On November 2, 2023, the US Treasury Department added the LNG plant project to the sanctions list. The agency also set January 31, 2024 as the deadline for completing the Arctic LNG-2 deals.

As Kommersant wrote at the end of December, all foreign shareholders of the project – France's TotalEnergies, China's CNPC and CNOOC, and a consortium of Japan's Mitsui and JOGMEC – had to declare force majeure for participation in Arctic LNG-2.

Each of them has a 10% stake in Arctic LNG-2. 60% of the shares belong to Russia's NOVATEK. According to the contract, each shareholder has the right to receive liquefied gas in proportion to its share.

The withdrawal of large foreign investors may lead to the Arctic LNG-2 project losing long-term contracts for the export of liquefied natural gas, Kommersant writes. According to the newspaper, Chinese and Japanese companies have asked the US authorities for an opportunity to exempt gas supplies from sanctions.

In the meantime, Arctic LNG-2 will have to sell gas on the spot market. As a shareholder of NOVATEK, TotalEnergies owns a total of 21.5% of Arctic LNG-2.

The $21 billion Arctic LNG-2 project is vital for Russia, which currently produces 8% of the world's LNG and wants to increase this share to 20% in 2035.

Specifically, the US sanctions are intended to dissuade potential buyers and carriers from supplying liquefied natural gas from Arctic LNG 2 under the fear of sanctions. However, Russian Deputy Prime Minister for Energy Alexander Novak said on December 27 that the giant project had started successfully despite the US sanctions, without specifying who the first foreign customer was.

"The Arctic LNG-2 plant is currently under construction, and the first stage has already been put into operation. We expect the first deliveries of this project to take place in the first quarter of next year," he assured.

Background. As a reminder, the United States has announced its intention to "kill" the Russian LNG project Arctic LNG 2. They plan to do this by imposing sanctions and cooperating with G7 partners.