By Selina Williams
French oil major Total S.A. on Monday said it was in talks with
Chinese banks to help fund a major natural-gas project in Russia in
a move to get around tightening Western sanctions over Ukraine.
Chief Financial Officer Patrick de la Chevardière said the
company was looking at financing its share in the $27 billion Yamal
liquefied natural-gas project in Chinese yuan, Russian rubles and
euros.
"The effect of U.S. sanctions was that Yamal LNG will be
prevented from raising any dollar financing," Mr. de la Chevardière
told a news briefing in London. Total is developing the onshore
Yamal project in Russia's Arctic north with independent Russian gas
producer OAO Novatek and China's CNPC.
Total would first look for financing for Yamal from export
credit agencies such as France's Coface and Italy's Sace and then
add Chinese and Russian finance, Mr. de la Chevardière said.
Total's move comes as U.S. oil giant Exxon Mobil Corp. said last
week is it winding down its drilling campaign in the Russian Arctic
because of sanctions announced by the U.S. and European Union this
month. The setback to Exxon's $3.2 billion deal to explore for oil
with Russia's Rosneft in the Arctic could represent the biggest
corporate casualty of sanctions so far.
Earlier this month, Russian officials said that restrictions on
western technology for drilling in hard-to-reach areas such as the
Arctic Sea could hurt future oil production if they persist.
Russia relies on oil and gas to provide the bulk of its revenues
and Yamal is vital to Kremlin plans to increase the country's share
in the fast-growing global LNG market.
Total is in turn relying on Yamal, which is expected to start up
in 2017, to provide a chunk of the French's company's future
production growth. Yamal is estimated to hold proven reserves of
800 million barrels of oil equivalent.
U.S. and EU sanctions imposed so far include financing limits on
some banks and energy companies and restrictions on technology
transfers and equipment to develop deep-water and offshore Arctic
oil and onshore shale oil. They come on top of asset freezes and
travel bans on dozens of officials and tycoons, including one of
Novatek's biggest shareholders-- Gennady Timchenko.
Yamal is a complex project requiring western technology that
Russia lacks, such as the liquefaction plant that will supercool
the gas into liquid form so it can be transported around the world
in giant tankers.
The project has so far managed to proceed despite the sanctions
because the companies involved have been able to pursue other
avenues for finance.
Mr. Chevardière said it was too early to say how the latest U.S.
sanctions, which include a ban on western companies supporting the
activities of a number of Russian oil and gas companies, will
affect Total's venture with Lukoil to develop the Bazhenov
shale-oil formation in western Siberia where Western know-how will
also be vital.
Total Monday also reduced its medium-term production forecast.
The company now expects to produce 2.8 million barrels of oil
equivalent a day in 2017, compared with its previous forecast of
3.0 million, because of delays on projects and additional asset
sales.
Write to Selina Williams at selina.williams@wsj.com