Russia has commenced shipments of liquefied natural gas from the Arctic as part of one of the world's largest LNG development projects, and it owes China a big "thank you."
The Yamal Peninsula LNG project in northwestern Siberia is a $27 billion endeavor. After the West enacted economic sanctions against Russia over its annexation of Crimea, it was China that stepped up to provide vital funding, acquiring a roughly 30% interest in return.
China clearly had its own growing appetite for energy resources in mind. But almost certainly, it also factored in future development opportunities and the use of the Northern sea route along the Russian Arctic.
"A fantastic sight," Russian President Vladimir Putin said on Dec.8, when asked what he thought of the airfield in the Yamalo-Nenets village of Sabetta, where the plant is situated. Putin said he was confident the next phases of the plant would proceed quickly.
"This is only the first stage of the project," he said. "I'm sure the second stage will also be launched ahead of schedule, as early as next year, and the third stage probably also, at the end of next year, or the beginning of 2019 at the latest."
Russia's second-largest natural gas producer, Novatek, owns 50.1% of the Yamal LNG project. France's Total and China National Petroleum Corp. each own 20%. The remaining 9.9% is held by the Silk Road Fund, which is a Chinese state-owned investment fund.
Once fully operational, Yamal LNG will have the capacity to produce 16.5 million tons of LNG a year, which is equivalent to about 20% of the yearly imports by Japan -- the world's largest LNG consumer. China's CNPC has the right to import 3 million tons each year for 20 years.
The Yamal LNG project hit a snag in 2014, when Russia annexed the Crimean Peninsula and the U.S. and European Union retaliated by enacting economic sanctions. The penalties made it difficult for Novatek to procure funds from Western financial institutions.
China offered a helping hand through the Silk Road Fund in 2015, providing 730 million euros ($859 million at the current rate) to Novatek. In a policy document released this past June, the Stockholm International Peace Research Institute concluded that China had become the main source of funds for Russia's Arctic Ocean development, bankrolling 60% of the Yamal LNG project when you consider credit lines extended by the Export-Import Bank of China and the China Development Bank.