French company Technip, the last major remaining western partner to construct Novatek’s flagship LNG project in the Arctic, announced that it had finalized plans for an “orderly” exit from the project expected to be completed during the first six months of 2023.
And then there were none. With France’s Technip announcing its definitive departure from the Arctic’s largest LNG project in the first half of 2023, Novatek, the Russian energy company who owns Arctic LNG 2, has lost all of its major western construction and technology partners.
Following the onset of Russia's war against Ukraine, Technip originally intended to continue working with Novatek on the project. At the time the company’s CEO Arnaud Pieton stated that while the company would not pursue any new business ventures in Russia it would continue meeting its contractual obligations related to the project.
However, the company’s position had since gradually changed in light of an increasing sanction regime. Last week’s announcement represents the final step in exiting the project.
"We have signed an Exit Framework Agreement with our customer […] and anticipate completing this process within the first half of 2023," stated Pieton as part of last week’s earnings statement.
Major western partners have exited
Prior to Technip’s departure a host of other companies had announced their decisions to exit the project. The list includes some of the largest industrial and energy conglomerates in Europe, including Germany’s Siemens and France’s Total.
Novatek also lost a number of key partners in Asia
Other multinational companies who ended their involvement in the project are German gas and engineering company Linde, Italian oil and gas services company Saipem, and American industrial service company Baker Hughes. Some companies registered multi-billion dollar write-offs as a result of leaving the project.
Novatek also lost a number of key partners in Asia, including Mitsui Group, one of the world’s largest industrial conglomerates. Japan’s government-owned Bank for International Cooperation withdrew a USD1.8bn loan for the project. Chinese shipyards also stopped constructing modules for the LNG plant.
Meanwhile in South Korea, major ship builder Daewoo Shipbuilding & Marine Engineering terminated a contract for the construction of several LNG tankers crucial for the transport of Novatek’s LNG.
Efforts to find new partners
Novatek has since turned to domestic companies, including Nova Energies, and corporations outside the western sanctions regime to help it complete at least parts of the Arctic LNG 2 project. However, the completion of even the first stage of the plant will be delayed by at least a year the company recently announced.
For the purpose of bypassing sanctions and securing access to key technology, Novatek is partnering with newly established company Green Energy Solutions based out of the United Arab Emirates.
While EU sanctions have hit the construction of Russian LNG projects hard, they have not been aimed at curtailing the flow of the country’s LNG into Europe. Latest figures show that imports of Russian LNG to Europe are up significantly during the first nine months of 2022 compared to the same period last year.