China Seeks Exemption from U.S. Sanctions on Russian LNG Plant

(Reuters) — China's state oil majors CNPC and CNOOC have both asked the U.S. government for exemptions from sanctions on a new Russian liquefied natural gas (LNG) export plant, a Beijing-based industry official with direct knowledge of the matter said.

CNOOC Ltd and China National Petroleum Corp (CNPC) each have a 10% stake in the Arctic LNG 2 project controlled by Novatek, Russia's largest LNG producer, which holds a 60% stake in the project.

"This is a standard response as an equity partner communicating with OFAC to protect our interest in the project," said the source, who declined to be named as the matter remained confidential.

The Office of Foreign Assets Control (OFAC), under the U.S. Department of the Treasury, has yet to respond, the source added.

Bloomberg News had earlier reported that the Chinese firms were preparing to ask for the exemption.

Last month, the U.S. imposed sweeping new measures against Russia over the war in Ukraine, including sanctions targeting a major entity involved in the development, operation and ownership of the Arctic-2 LNG project in Siberia.

LNG vessels could fall foul of U.S. sanctions if they pick up fuel from Arctic LNG 2, the Bloomberg report said, adding that CNOOC and CNPC also purchase LNG from the United States, and don't want to endanger their supply from American projects.

CNOOC, CNPC and Novatek did not immediately respond to Reuters requests for comment.

Reuters reported on Wednesday that Novatek had sent force majeure notifications to some of its clients over future supplies from Arctic-2, which is due to start production before the end of this year or in early 2024.

The project is a key element of Russia's drive to increase its share of the global LNG market to a fifth by 2030 from around 8% now. The first LNG tankers from the project were expected to set sail in the first quarter of next year.

France's TotalEnergies and Japan Arctic LNG, a consortium of Mitsui & Co and JOGMEC, are two other shareholders, with a 10% stake each.

Japan, which relies on LNG as a transition fuel before it reaches carbon neutrality in 2050, had previously said it would make sure its supplies were not affected by the sanctions, but said "a certain degree" of impact was "inevitable."

A U.S. state department spokesperson said in November Washington was working closely with partner countries over sanctions on the project.

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