Yamal LNG to meet contractual supply despite sanctions

The 16.5mn t/yr Yamal LNG project will meet its contractual supply obligations despite sanctions affecting six Arc7 vessels, operator Novatek said.

Yamal LNG has the capacity to ensure supply matches agreed timelines, the firm added.

Four operational Arc7 ice-class vessels owned by a 50:50 joint venture (JV) between Bermuda-based shipowner Teekay and China LNG Shipping International (CLNG) have fallen under US Treasury Department sanctions, Teekay announced yesterday, with two more Arc7s to be delivered in the next two months also under sanctions.

CLNG is 50pc-owned by Cosco Shipping Tanker Dalian (Cosco Dalian), on which the US Treasury placed sanctions. All subsidiaries in which Cosco Dalian holds 50pc or more in equity are also under sanction. But these do not apply to Cosco Dalian's parent company, Cosco Shipping Energy Transportation (CSET).

Yamal LNG currently has 12 operational 172,600m³ Arc7 vessels, with the Georgiy Ushakov en route to Yamal's Sabetta port to load its first cargo and the Yakov Gakkel still undergoing sea trials at South Korean shipbuilder DSME's Okpo shipyard for delivery in November. Both vessels are owned by the CLNG-Teekay JV. And Yamal's first Arc7 — the Christophe de Margerie — is undergoing drydocking in Denmark.

Total and China's CNPC both hold 20pc in the Yamal project, equating to around 3.3mn t/yr each, with Silk Road Fund holding 9.9pc. Novatek markets Silk Road Fund's 1.63mn t/yr share of the project.

Novatek has retained a 50.1pc stake in Yamal LNG, with 2.5mn t/yr of its 8.27mn t/yr offtake tied to a supply deal with Spain's Naturgy, leaving the operator with around 5.77mn t/yr of the project's nameplate capacity to sell on the spot market. Yamal LNG has operated above capacity for much of 2019, with the third 5.5mn t/yr train ramping up production last winter.

These spot volumes suggest that Novatek has the flexibility to meet its contractual obligations despite four vessels remaining under sanctions.

CLNG also holds equity in a JV with Dynagas and Sinotrans that provides five Arc7 vessels to Yamal LNG, but with this limited to a 25.5pc stake, the venture does not fall under the US sanctions.

And the three Arc7 vessels owned by a 50:50 JV between Mitsui OSK Lines and 100pc-owned CSET subsidiary Cosco Shipping LNG Investment (Shanghai) also do not fall under the sanctions. The two firms have another 50:50 JV for the supply of four conventional carriers to the Yamal project, the first of which is expected for delivery in the fourth quarter of this year.

The sanctions on Cosco Dalian have provided little support for the recent rise in LNG spot charter day rates, with only 12 carriers in total affected, market participants said.