China to Seek Exemptions to US Sanctions on Russian LNG

(Bloomberg) -- China is preparing to ask the US for exemptions to sanctions on a new Russian liquefied natural gas export plant, as companies seek to prevent disruptions to the flow of a fuel crucial to heating homes and powering industry.

State-owned Cnooc Ltd. and China National Petroleum Corp. each has a stake in Novatek PJSC’s Arctic LNG 2 project in Russia. The companies are planning to ask for the exemptions because the US measures threaten deliveries, according to people with knowledge of the matter, requesting anonymity because the plans aren’t public.

The US imposed sanctions on the facility in November, as it widened restrictions on Russian firms in the wake of Moscow’s invasion of Ukraine. 

LNG vessels could fall foul of US sanctions if they pick up fuel from Arctic LNG 2, the people said. Cnooc and CNPC also purchase LNG from the US, and don’t want to endanger their supply from American projects, the people added.

China is the world’s biggest buyer of LNG, and also imports large quantities of Russian gas via overland pipelines. Cnooc and CNPC didn’t immediately respond to emails seeking comment.

The request would be rare for China, which tends to find ways to work around sanctions imposed by its geopolitical rival. For example, Russia has been able to sidestep restrictions on its oil shipments to China with the assistance of a “dark fleet” of tankers that are separate from the wider industry and can conceal the origin of their cargoes. But LNG vessels are specially designed to ferry the super-chilled fuel from enormous export facilities, and hiding their movements is nearly impossible. 

Meanwhile, the start of exports from Arctic LNG 2 is at risk of being delayed after Novatek declared force majeure on shipments to some of its buyers following the US measures. Novatek had planned to start production from the first of three trains by the end of the year, with shipments commencing in early 2024.

Other spot market news:

• Venture Global offered to sell an LNG cargo for Jan. 19 loading from the Calcasieu Pass project in the US
• Venezuela issued a license to Shell and Trinidad’s state-owned gas company for the export of natural gas from an offshore joint venture to the island nation’s processing plants
• AES completes minority sell-downs of businesses in the Dominican Republic and its AES Colon business in Panama for $338m

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