International lenders 'back $9.5bn financing for Russia's Arctic LNG 2'

International lenders have lined up about $9.5 billion in financial support for Russia's Arctic LNG 2 project, even as such projects come under greater scrutiny over climate concerns, according to documents.

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 tonnes per year in 2026. 

The interest of international institutions 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 a recommended offer of $700 million in credit finance; the China Development Bank, expected to offer a facility worth $5 billion, and Germany’s Euler Hermes, with a covered facility of $300 million, the document said. But Bpifrance said “the decision to grant a public guarantee within the framework of the Arctic LNG 2 project has not been taken”. 

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 a low-carbon economy envisaged in the Paris climate agreement and the European Union’s Green Deal economic plan.

The Japan Bank for International Cooperation is also seen providing a facility of $2.5 billion; an unidentified Russian bank $1.5 billion and Italy’s SACE a covered facility of $1 billion. Russia's top lender Sberbank has already said it is ready to provide more than €2.7 billion in financing for the project, which aims to process gas from the Gydan Peninsula and ship 80% of LNG to Asia.

The project's equity partners include France's Total, China National Petroleum, 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.

Bpifrance’s recommendation, which could yet be rejected by the government, highlights the importance of the project for one of France’s industrial champions.

The document said Bpifrance Assurance Export gave a “favourable 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 finalisation of the environmental and social analysis.