|
 The Yamal plan, a $27 billion investment to tap vast natural gas
reserves in northwest Siberia, aims to double Russia's stake in the
fast-growing market for liquefied natural gas. If it stays on track,
it will also show the West that the world's largest energy industry
is not cracking under sanctions.
Russia has said it will make sure Yamal has the resources it needs
to keep building. But that pledge will be tested: Yamal's gas is so
far in the Arctic North that it requires specialised technology
often provided by Western partners - many of which will not be able
to operate because of the restrictions.
And while Yamal's shareholders have already invested $6 billion in
it, U.S. and EU action has now effectively cut off the Russian
energy firm's access to Western lending.
Nonetheless, bankers and analysts returning from a recent trip to
Yamal said they were impressed by the project's status.
Some said it was hard to tell that Yamal's controlling shareholder,
gas firm Novatek, and its billionaire co-owner Gennady Timchenko
were subject to some of the most severe U.S. and EU sanctions
targeting Putin after he annexed Crimea in eastern Ukraine and lent
backing to pro-Russia separatists.
"I was astonished by the pace and amount of work that has been
done," said Maxim Moshkov, oil analyst at UBS.
Some 6,000 people are currently working on the project and the
number will rise to 15,000 next year.
"They work day and night... Having been there, I realised the
project will most likely become a reality," Moshkov said.
Andrey Polishchuk from Raiffeisen bank said: "They are building a
new airport, storage tanks. Ships are coming to a nearby port one
after another. Some are unloading goods, some are waiting to
unload".
POWERFUL PARTNERS
Yamal has powerful partners - French oil major Total and China's
CNPC.
Total said this week that despite the sanctions it would not be
stopping work on Yamal and has suggested that, given Europe relies
on Russia for a third of its gas, it would be risky to slow down the
project.
Yamal will start exports from 2018 and has already pre-sold most of
its future output to buyers in Europe and Asia. It will ultimately
export 16.5 million tonnes of LNG a year - equal to 6 months of
French gas consumption.
Novatek, along with gas monopoly Gazprom, has so far escaped
European sanctions, but the fact that it is on the U.S. sanctions
list makes it almost impossible for it to raise money for the
project.
So Total is still clear to participate in Yamal. But its ability to
finance its share in it through U.S. or European banks has been
drastically limited.
"Can we live without Russian gas in Europe? The answer is no. Are
there any reasons to live without it? I think - and I'm not
defending the interests of Total in Russia - it is a no," Total boss
Christophe De Margerie told Reuters.
 Timchenko, co-owner of Novatek, is also a force to be reckoned with
- his closeness to Russian President Vladimir Putin giving him heft
even as it makes him a target for sanctions.
In March 2014, the United States slapped the first round of
sanctions on him, explaining: "Timchenko's activities in the energy
sector have been directly linked to Putin".
[to top of second column] |
Putin subsequently made Timchenko Russia's point person for business
relations - including the development of key gas projects - with
China.
Timchenko has said China, which has a 20 percent stake in Yamal
through CNPC, has agreed to lend $20 billion before the end of 2014.
But there is still work to do to win that loan.
"We have had communications from higher management over compliances
that we shall strictly follow international rules," a Chinese
banking executive told Reuters on condition of anonymity given the
delicate nature of the negotiations.
"Basic principles are - we shall not deal with entities that are
sanctioned...We don't want the U.S. to find excuses to give us
trouble."
SUPPORT FROM HOME
If China can't put up the money, Putin is likely to.
The Russian government, which has accumulated the world's third
largest forex reserves of $460 billion, has said it will invest
money in profitable projects which can guarantee hefty payouts to
state coffers in the future.
Various officials have pledged support to Gazprom, state oil firm
Rosneft and pipeline and railway monopolies Transneft and RZhD.
And Prime Minister Dmitry Medvedev told Novatek's chief and co-owner
Leonid Mikhelson that Russia would support other companies too,
irrespective of their ownership structure.
"Should (their Chinese lending) plan fail, they can count on state
support. The government has made it clear it will not allow it to
fail," said a Western oil executive close to the project.
The crunch point for Yamal will come next year when France's
engineering firm Technip needs to deliver the core liquefaction
plant - technology that Russia is lacking.
Technip told Reuters this week it was moving forward with the
project. It had earlier warned about the risks to its income from
sanctions on Russia.
If Technip should run into difficulties - the pace at which
sanctions have evolved in the past months suggests more could yet be
in the offing - Russia might be able to source the technology from
China, which has in recent years become able to design and build
large LNG plants.
"There might be an opportunity lurking in terms of supplying our own
gas liquefaction technology," said an engineering executive at CNPC.
(Additional reporting by Aizhu Chen, Vladimir Soldatkin, Denis
Pinchuk and Sandrine Bradley; Editing by Sophie Walker)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
