Bloomberg: Russiaʼs Arctic LNG 2 project stalled after tightening sanctions

Author:
Olha Bereziuk
Date:

Russiaʼs Arctic LNG 2 plant has stopped liquefying natural gas as Western bans limit its ability to ship and sell cargo.

This was reported to the Bloomberg agency by sources.

Commercial gas liquefaction at the plant has been halted due to high inventories, as the plant cannot freely export cargo.

The company, located beyond the Arctic Circle, has been the target of several waves of Western sanctions over the past year. Restrictions imposed by the US and its allies over the Kremlinʼs incursion into Ukraine have limited Arctic LNG 2ʼs access to ice-class tankers built for the project in South Korea and made foreign buyers reluctant to buy cargoes.

As a result of the shutdown, average daily production at the gas field that feeds the Arctic plant fell to 5.3 million cubic meters this month. Thatʼs less than half the daily output during most of September, which averaged 12.1 million cubic meters.

Some gas processing is necessary to support LNG facilities even when they are not operating on a commercial scale. The Arctic LNG 2 project pumped and processed small volumes of gas earlier this year, before it began loading.

Although the plant managed to start shipping its supercooled fuel in August using conventional gas carriers, often with opaque ownership structures, and has sent eight cargoes to market so far, none of the batches have been able to find a buyer.

Since mid-October, Russia has banned conventional vessels from passing through eastern Arctic waters to Asia due to harsher-than-expected ice conditions. This restriction has further limited shipping options for the Arctic LNG 2 project until the passage opens to non-ice-class vessels next summer.

The design capacity of Arctic LNG 2 is 19.8 million tons per year, but so far only one process line is operating, capable of producing 6.6 million tons per year. In the summer, the plant increased the volume of production and liquefaction of natural gas, and in August, with the start of exports, the volume reached the highest level of this year.

What preceded

In December 2023, construction of the first of three liquefaction units was completed at Arctic LNG 2, and the plant began producing LNG.

In April of this year, the US tried to use sanctions to disrupt the large-scale Russian Arctic LNG 2 project, which involved the construction of a huge coastal plant for the production of liquefied natural gas in the Arctic north of the Russian Federation. Sanctions led to the fact that a number of companies from different countries refused to cooperate with Russian Arctic LNG. At the time, the WSJ wrote that LNG production had stopped, and the plant mainly recirculates already produced gas.

In total, since September, the US has hit the young Russian LNG industry with four waves of sanctions. These include Arctic LNG 2 operator companies, storage vessels, shipping companies trying to acquire specialized vessels for the project, as well as companies working on a second facility near the Baltic Sea.

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