Chinese Banks May Fund Yamal LNG If Europeans Exit, Total Says

Chinese lenders may boost funding for the $27 billion Yamal LNG venture to export liquefied natural gas from Russia’s Arctic if European banks pull out over the crisis in Ukraine, the head of project partner Total SA said.

“The Chinese are putting an important sum on this project and if they put more it could compensate for the international portion,” Chief Executive Officer Christophe de Margerie said. “The U.S. Eximbank has announced its withdrawal, others not yet, but we feel if things don’t improve, some western banks might put off their decision.”

There is a risk of a project delay, due for commercial operation in 2017, should the political situation worsen, he said.

Russia’s annexation of Crimea in Ukraine after pro-Moscow President Viktor Yanukovych was ousted drove relations with the U.S. and Europe to the lowest since the Cold War. Total’s reliance on Russia to meet growth targets was thrown into relief by U.S. sanctions against Russian officials including Gennady Timchenko, a shareholder of Yamal venture partner OAO Novatek.

Total and Novatek reached a final investment decision in December, with the Russian company taking 60 percent of the venture to produce 16.5 million metric tons of LNG a year, and Total and China National Petroleum Corp. 20 percent each.

“We’re not affected by financing problems or embargoes because for the moment there aren’t any,” De Margerie told reporters today in Paris after a shareholder meeting. “If there is, then there would be a risk of a slight slippage.” Chinese banks had already agreed to fund half the project, he said.

Total has said it will stick with plans to raise its stake in Novatek given Russia’s large oil and gas resources. The company also says it will still negotiate a new venture with OAO Lukoil for unconventional energy projects in Western Siberia.

Total plans to boost Russian output more than 30-fold over a decade, partly through Arctic projects, with output reaching as much as 400,000 barrels of oil equivalent a day by 2020.

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