Project Financing for Arctic LNG 2 Project in Gydan Peninsula, Russia
Contributing toward Establishment of LNG Value Chain in Asia and Promotion of Energy Transition
- Region: Europe
- Energy and Natural Resources
- Overseas Investment Loans
The Japan Bank for International Cooperation (JBIC; Governor: MAEDA Tadashi) signed on November 30 a loan agreement in project financing*1
amounting to up to EUR1.710 billion (JBIC portion) with Russian company LLC Arctic LNG 2 (ALNG2). The loan is internationally co-financed with China Development Bank, the Export-Import Bank of China, Sberbank of Russia (Sberbank), State Development Corporation (VEB), Gazprombank, Otkritie Bank, and others.
In this project, an LNG plant (annual nameplate capacity of 19.8 million tons) will be constructed and operated on the Gydan Peninsula in the Yamalo-Nenets Autonomous District of Russia. In July 2019, Japan Arctic LNG B.V., which is a Dutch entity invested in by Mitsui & Co., Ltd. and the Japan Oil, Gas and Metals National Corporation, acquired 10% interest in the project*2
. The loan is intended to finance the funds necessary to develop the gas field and produce products such as LNG.
Natural gas produces less greenhouse gases than other fossil fuels and mitigates environmental impacts. As initiatives for realizing a decarbonized society and carbon neutrality*3
are accelerating globally, natural gas is attracting attention as a source of energy during the energy transition, and the growing global demand for LNG is projected to continue. Also, in its Strategic Energy Plan and Infrastructure System Overseas Promotion Strategy 2025 (revised in June 2021), the Government of Japan recognized that one of its most crucial policy agendas is to secure the stable supply of natural gas to Japan. Japanese parties will offtake approximately 10% of the LNG produced by the project. Thus JBIC’s support for the project will contribute toward securing long-term, stable supplies of LNG, which is an important energy resource for Japan, and to diversifying LNG supply sources for Japan.
In addition, the LNG produced by the project is scheduled to be shipped though the Northern Sea Route and sold in both markets in Asia and Europe, two major areas for LNG demand. Since nearly 80% of the LNG from the project will be exported to Asian countries through the eastbound Northern Sea Route all year round, JBIC’s support for the project will also contribute toward establishing an LNG value chain in Asia and the energy transition from carbon-intensive energy sources*4
to natural gas.
As Japan's policy-based financial institution, JBIC will continue to provide financial support to projects that contribute toward securing important energy resources for Japan and toward energy transition, by drawing on its various financial instruments for structuring projects and performing its risk-assuming function.
Project finance is a financing scheme in which repayments for a loan are made solely from the cash flow generated by the project.
JBIC provided a loan to Japan Arctic LNG B.V. to finance part of the funds for acquiring the interest in the project. For details, See Press Release on July 2, 2019
Carbon neutrality is a state where the amount of greenhouse gases emitted is balanced by the amount removed so that they are net zero.
Carbon intensive energy sources are fossil fuels such as coal that produce a large amount of greenhouse gases.