Western Industry Giants Bolt Russia, Threatening $33 Billion in Projects

Researched by Industrial Info Resources (Sugar Land, Texas)--Within just two weeks, U.S. and European companies have cut ties with Russia and its industrial leaders at a pace that few, if any, market observers predicted. Sanctions from Western governments have crippled Russia's major financial institutions, which, along with some old-fashioned public shaming, has forced some of the world's most recognizable industry titans to reconsider high-value investments in Russia's oil, gas, mining and automotive sectors, among others. Industrial Info is tracking more than $33 billion worth of projects in Russia that have been affected by the conflict, the bulk of which are in the energy industry.

Click on the image at right for a list of the top foreign-based parent companies for Russian plants to see their operations halted or otherwise affected amid the war in Ukraine. This excludes companies that are, or were, in joint ventures or other partnerships with Russian-based firms like Rosneft.

One of the highest-valued projects to be affected is the Arctic LNG-2 export project in northern Siberia, on the Gydan Peninsula. Less than a year ago, Novatek (Tarko-Sale, Russia), which is Russia's second-largest natural gas producer, secured 20-year sales and purchase agreements for all of the project's expected future capacity of about 20 million tons of liquefied natural gas (LNG). For details, see May 11, 2021, article - Novatek's Arctic LNG-2 Project Secures 20-Year Supply Deals.

But earlier this month, Italy announced it was putting its share of financing for the $21 billion Arctic LNG-2 project on hold. This followed sanctions from the U.S., the U.K. and the European Union (EU) on major Russian financial institutions, including Sberbank, Gazprombank, Bank GPB International S.A., VEB.RF and Otkritie, which were to provide a total of 4.5 billion euros (US$4.95 billion) in project financing, according to The Barents Observer. Such sanctions can lead to a "domino effect" in which other lenders, both public and private, reconsider the viability of a project. Italy's now-frozen loan to the Arctic LNG-2 project is estimated at 500 million euros (US$561 million), according to Reuters.

Without this financing, it is unlikely the Arctic LNG-2 project will move forward in any significant way. Novatek began construction on the first phase in late 2019, and was preparing to begin construction on the second phase later this year and the third phase in late 2023; each phase is designed to produce 6 million tons per year of LNG. The project already had been dealt setbacks due to the COVID-19 pandemic. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can read detailed reports on Phase I, Phase II and Phase III, and click here for a full list of Arctic LNG-2 project reports.

Russian state-controlled oil and gas company Rosneft (Moscow) is among the energy giants to be directly sanctioned by the U.S. and its partners. North American-based companies such as Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas), SNC-Lavalin Group Incorporated (TSX:SNC) (Montreal, Quebec) and BP plc (NYSE:BP) (London, England) have exited, or are in the process of exiting, any joint ventures or other partnerships with Rosneft. This will make it difficult for the oil and gas giant to justify massive projects like the South Prinovozemelsky Crude Oil Field Development in the Barents Sea.

The South Prinovozemelsky project involves constructing a semi-submersible platform or other subsea infrastructure to exploit an area with estimated reserves of 70 million barrels of oil. Rosneft had hoped to begin work on the field development, drilling program and subsea installations in late 2023. In late 2020, Rosneft boasted that its recent discoveries in the Prinovozemelsky area could rival the Gulf of Mexico, the Arctic shelf of Alaska and parts of the Middle East in output, but the entire project's viability is now up in the air. Subscribers can read detailed project reports on the proposed field development, drilling program and subsea installations.

For more information on corporate exits from Russia among oil and gas players, see Industrial Info's March 1, 2022, article - BP, Equinor, Shell Pulling Out of Russia over Ukraine Invasion; March 3, 2022, article - ExxonMobil Pulls Out as Operator of Sakhalin-1, Cites Ukraine Conflict; and March 7, 2022, article - SNC-Lavalin Presses Forward on Energy, Mining Projects as Pandemic Lingers.

Outside the energy industry, HeidelbergCement AG (Heidelberg, Germany) is among the leading players in the Metals & Minerals Industry to suspend its Russian operations in response to the Ukrainian conflict. The company says it supplies the Russian cement market via three local cement plants and two terminals. Subscribers to Industrial Info's GMI Plant Database can click here for a list of affected facilities.

Pullouts and cancellations are not limited to U.S., U.K. and EU-based companies. Toyota Motor Corporation (NYSE:TM) (Toyota City, Japan) suspended operations at its Shushary Automotive Assembly Plant in St. Petersburg last week, citing supply-chain disruptions, and instructed all 26 Japanese employees in Russia and their families to return to Japan, according to Nikkei Asia. Toyota was planning to add production lines for exhaust systems and airbag and electrical components, as well as to modernize existing lines at the facility.

Volkswagen AG (Wolfsburg, Germany), Ford Motor Company (NYSE:F) (Dearborn, Michigan) and Hyundai Motor Company (Seoul, South Korea) also have halted operations at their Russian facilities. In response, Andrei Turchak, the secretary of the Russian ruling party's general council, proposed on the United Russia website nationalizing the production plants of any companies "that announce their exit and the closure of production in Russia during the special operation in Ukraine." It is unclear how seriously his proposal is being taken among Russia's elite. Subscribers can read detailed reports on Toyota's planned new lines for exhaust systems and airbag and electrical components, and the other modernizations.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: LinkedIn.