Novatek’s Yamal LNG 'unaffected' by sanctions

Novatek’s giant Yamal LNG project will continue apace, despite sanctions being imposed on the Russian independent by the US this week.

The London-listed player expressed surprise at the measure imposed by the US Treasury Department on Wednesday, but remained adamant that it has sufficient financial clout and its assets or operations are not under threat.

Novatek, state oil behemoth Rosneft, two Russian banks and other institutions and individuals were hit with fresh sanctions by the US looking to squeeze the administration of President Vladimir Putin over the annexation of Crimea from Ukraine.

Under the new sanctions, US companies and individuals will not be able to provide new financing to any of the sanctioned companies or entities, thereby cutting off their access to US capital markets.

Novatek is the operator of the giant liquefied natural gas project in Yamal, where it holds a 60% stake. Last year it agreed to farm out 20% to China National Petroleum Corporation, with French supermajor Total also on 20%.

The project involves development of the South Tambey condensate gas field and a three-train liquefaction project capable of producing 16.5 million tonnes per annum. Two of the trains are due to come on line in the first phase in 2017 and the third in 2020.

Responding to the sanctions, the Russian independent said on Thursday: “Novatek is a privately-listed company not conducting any business activities in Ukraine, nor does it have any impact on the political and economic processes taking place on its territory.

“The inclusion on the List does not impede Novatek’s operations and business activities in any jurisdiction, nor does it affect the company’s assets and listed shares.”

The company was at pains to point out that it lists US citizens and major US investment funds and banks amongst its shareholders.

“Novatek’s financial position is stable, and the company’s cash flows are sufficient to fulfill its key strategic plans, service its existing debt portfolio and make payments according to the company’s dividend policy.

Undoubtedly with Yamal LNG in mind, it continued: “The implementation of large-scale projects with Novatek’s participation will continue as planned. Together with our international partners, the company will take all necessary measures to secure project financing and implement the LNG project as scheduled.”

The sanctions did, however, hurt the company’s share price significantly, as they dropped around 10% on Thursday in London.

Rosneft’s shares were also down more than 5% in the UK capital, while UK supermajor was down almost 2%, possibly on account of its sizeable stake in the Russian oil giant.

Rosneft boss Igor Sechin, himself sanctioned by the US in late April, had already hit out at the sanctions, calling them “groundless, biased and illegal” on Wednesday.

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