International lenders back $9.5bn financing for Russian gas project

Europe’s bankrolling of LNG projects is facing increasing criticism. (Reuters)
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Updated 19 September 2020

International lenders back $9.5bn financing for Russian gas project

  • Russian top lender Sberbank has already earlier said it was ready to provide more than €2.7 billion ($3.2 billion) in financing for the project, which aims to process gas from the Gydan Peninsula and ship 80 percent of LNG to Asia

LONDON: International lenders have lined up about $9.5 billion in financial support for a Russian Arctic liquefied natural gas (LNG) project, a document seen by Reuters showed, even as such projects come under greater scrutiny over climate concerns.
The $21 billion project, which received final investment approval a year ago, is expected to be launched in 2023 and to reach its full capacity of almost 20 million tons per year in 2026.
While the energy industry touts natural gas as a cleaner alternative to coal or crude, it is a source of carbon emissions and critics say LNG projects are hard to reconcile with the transition to low-carbon economy envisaged in the Paris climate agreement and the EU’s Green Deal economic plan.
The interest of international institutions, however, gives a boost for the Arctic LNG 2 development, led by Russian non-state company Novatek as Moscow’s plans to raise its share in the global LNG market.
Among them is French state investment bank and credit agency Bpifrance, with an offer of $700 million in credit finance and Germany’s Euler Hermes, with a covered facility of $300 million, the document said.
Alongside Bpifrance’s support, the document said a number of other state-backed institutions are also expected to help fund the project including the China Development Bank, which is expected to offer a facility equivalent to $5 billion.
The Japan Bank for International Cooperation is also seen providing a facility of $2.5 billion; an unnamed Russian bank $1.5 billion and Italy’s SACE a covered facility of $1 billion.
Russian top lender Sberbank has already earlier said it was ready to provide more than €2.7 billion ($3.2 billion) in financing for the project, which aims to process gas from the Gydan Peninsula and ship 80 percent of LNG to Asia.


• Bpifrance among backers of Arctic LNG 2.

• Financing could yet be rejected by French government.

• Project is charged with political, climate issues.

The lineup described in the document, if backed in full, would cover the need for the external financing, earlier estimated by Novatek at $9 to $11 billion.
The project’s equity partners include France’s Total, China National Petroleum Corp, China’s CNOOC and the Japan Arctic LNG consortium made up of Mitsui & Co. and state-owned JOGMEC, formally known as Japan Oil, Gas and Metals National Corp.
While Bpifrance’s recommendation, detailed in an internal document, comes with caveats and could yet be rejected by the government, its support highlights the importance of
the project for one of France’s industrial champions.
The document said Bpifrance Assurance Export gave a “favorable opinion” to the strategic project guarantee “subject to subsequent examination of the project’s risk profile and its economic fundamentals” and with a “strong reserve” waiting for the finalization of the environmental and social analysis.
Bpifrance and Total both declined to comment and Novatek had no immediate comment.
Relations between Europe and Russia, including energy, remain tense after a poisoning attempt of Russian opposition politician Alexei Navalny sparked calls for another key energy project between the two, Nord Stream 2, to be ditched.
The role of European development institutions in bank-rolling LNG projects around the world has also come under greater scrutiny given EU’s ambitious climate goals.
Export credit agencies such as Bpifrance provide government-backed loans, guarantees, credits and insurance to private companies to help make it easier for them to do business abroad.
A spokeswoman for JBIC, which has already announced one loan for up to €125 million to help Mitsui & Co. and the Japan Oil, Gas and Metals National Corporation take an equity stake in the venture, declined to comment on the Bpifrance document as she could not confirm the figure.
SACE declined to comment. CDB did not immediately reply to a request for comment. Euler Hermes directed the question to the Federal Ministry of Economic Affairs and Energy.
The ministry said it was not “not authorized to provide third parties with any information in this respect.”

Fishing rights top Brexit talks agenda

Updated 7 min 12 sec ago

Fishing rights top Brexit talks agenda

  • A no-deal scenario is widely expected to cause economic chaos

LONDON: Last-ditch Brexit trade talks continued in London on Sunday with fishing rights remaining an “outstanding major bone of contention,” according to British Foreign Minister Dominic Raab.

EU chief negotiator Michel Barnier told reporters that “work continues, even on a Sunday,” as he arrived for the second day of talks.

Barnier had arrived in London on Friday following a spell in self-isolation after a member of his team contracted coronavirus and ahead of the resumption of talks with British counterpart David Frost on Saturday.

Both men warned that a deal could not be reached without major concessions from the other party.

There are only five weeks to go until the end of the current transition period, during which trade relations have remained largely unchanged.

The two key sticking points remain post-Brexit access to British fishing waters for European vessels and the EU’s demand for trade penalties if either side diverges from common standards or state aid regulations rules.

Raab told Sky’s Sophy Ridge on Sunday that this could be the final week of “substantive” talks, with time running out to agree and ratify a deal.

“There’s a deal to be done,” he said.

“On fishing there’s a point of principle: As we leave the EU we’re going to be an independent coastal state and we’ve got to be able to control our waters,” he added.

Barnier told envoys last week that London was asking that European access to UK waters be cut by 80 percent, while the EU was willing to accept 15 to 18 percent, according to a Brussels source.

A British official called the demands “risible,” according to the domestic Press Association, adding that the “EU side knows full well that we would never accept this.”

“There seems to be a failure from the Commission to internalize the scale of change needed as we become an independent nation,” said the source.

However, Raab was cautiously optimistic over the “level playing field” issue, saying “it feels like there is progress toward greater respect” for Britain’s position.

A failure to reach an agreement would see Britain and the EU trading on World Trade Organization terms, with tariffs immediately imposed on goods traveling to and from the continent.

As it stands, Britain will leave Europe’s trade and customs area on Dec. 31, with no prospect of an extension.

A no-deal scenario is widely expected to cause economic chaos, with customs checks required at borders.

Concern is particularly acute on the border between EU member Ireland and the British province of Northern Ireland, where the sudden imposition of a hard border threatens the delicate peace secured by 1999’s Good Friday Agreement.

The talks have already dragged on much longer than expected and time is running out for ratification of any deal by the European Parliament by the end of the year.