Total Hunts for Russian Gas Project Financing After Sanctions

Total SA, Europe’s second-biggest oil company, is searching for alternative financing for a $27 billion Russian natural gas project in the Arctic after sanctions barred dollar loans.

The company wants to get financing from French and Italian export-credit agencies as well as loans denominated in Chinese and Russian currencies, according to Chief Financial Officer Patrick de La Chevardiere. Total, which holds 20 percent of the project, is no longer counting on production starting in 2017 as originally planned.

“Work continues on the ground,” de La Chevardiere told reporters in London before an investor day. The company is “trying to avoid” advancing funds that aren’t absolutely necessary, he said.

Chief Executive Officer Christophe de Margerie has said he is committed the development even as U.S. and European conflict with Russia over Ukraine make the outlook for the OAO Novatek- led project more uncertain. Designed to produce liquefied natural gas on the Yamal Peninsula, a province above the Arctic Circle estimated to hold enough fuel to meet global demand for five years, the project is central to Total’s plans to boost output and Russia’s bid to export more LNG.

“The project has good economics,” de La Chevardiere said today. “I have no idea” whether the potential new sources of funding will raise capital costs, he said.

Project Started

China National Petroleum Corp. also holds a 20 percent stake, while the Russian company has 60 percent.

“The Chinese have offered to finance 50 percent of the project,” de Margerie said today. Novatek has “no problem to finance their share,” he said.

The latest round of sanctions intended to punish Russia for its involvement in separatist violence in Ukraine barred U.S. and European Union companies from helping Russia exploit oil resources in the Arctic.

“We can’t stop this project,” de Margerie said. “It’s started.”

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