Russia’s New LNG Project Can’t Begin Shipments Before March

Russia’s newest LNG export project, Arctic 2 LNG developed by Novatek, will not be able to start shipments before March as it is still waiting for at least one ice-breaker tanker that’s still in South Korea, Russian daily Kommersant reported on Thursday.

Earlier indications were that Arctic 2 LNG of Russia’s top LNG producer and exporter, Novatek, could begin its first cargo shipments to customers this month.

The U.S. sanctions, however, are holding the project’s start-up and are slowing progress as buyers refuse to take cargoes, according to anonymous sources who spoke to Kommersant.

The first shipment would depend on when the first Arc7 ice-breaker tanker from the South Korean shipyard Hanwha Ocean would arrive at the Russian LNG site on the Gydan Peninsula, the sources with knowledge of the situation told Kommersant. The tanker is still in Korea and even if it begins its journey to Russia now, it would take a month to reach the destination, the sources added.

The U.S. sanctions on Arctic LNG 2 have upended Novatek’s plans for production start-up and export timelines.  

In November, the U.S. Department of State designated limited liability company ARCTIC LNG 2, the operator of the Arctic LNG 2 Project, as part of additional sanctions against Russia “to further target individuals and entities associated with Russia’s war effort and other malign activities.” 

This has led some minority shareholders in the project, including France’s TotalEnergies, to declare force majeure on future deliveries.

Novatek holds a 60% stake in Arctic LNG 2. The other shareholders include CNOOC of China and China National Petroleum Corporation (CNPC), TotalEnergies, and Japanese firms Mitsui Group and Jogmec.  

Potential contract cancellations for the construction of ice-class LNG carriers and U.S. sanctions on Arctic LNG 2 could hamper Russia’s plans to boost LNG sales now that its pipeline route to Europe is largely cut off.  

By Tsvetana Paraskova for Oilprice.com

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