Putin Clears TotalEnergies Exit From Arctic LNG 2 as Russia’s Sanctioned LNG Project Faces Shipping Hurdles

Russian President Vladimir Putin has authorized France’s TotalEnergies to sell its 10% stake in the Arctic LNG 2 project, potentially opening the door to one of the most significant Western exits from Russia’s gas sector since Moscow’s invasion of Ukraine.

A presidential decree published on Tuesday permits the French energy major to dispose of its direct stake in Arctic LNG 2 to Russian company Nordline.

The move comes as Arctic LNG 2 remains hampered by Western sanctions, vessel shortages, and export restrictions that have prevented the project from reaching its originally planned production capacity despite billions of dollars of investment.

TotalEnergies has been one of Novatek’s closest foreign partners for more than a decade. In addition to its direct 10% stake in Arctic LNG 2, the French company owns 20% of the operational Yamal LNG project and retains a 19.4% shareholding in Novatek itself.

When Total acquired its Arctic LNG 2 stake in 2019, it estimated its combined direct and indirect economic interest in the project at roughly 21.6% through its Novatek holdings. The project was designed to produce 19.8 million metric tons of LNG annually from three liquefaction trains and rely on a specialized fleet of Arc7 icebreaking LNG carriers operating along Russia’s Northern Sea Route.

Unlike BP, Shell and ExxonMobil, TotalEnergies largely retained its Russian LNG investments after the start of the Ukraine war, arguing that sanctions did not prohibit its ownership interests. Investigations by independent media have shown the company continued receiving income linked to its Russian LNG holdings, including dividends associated with Yamal LNG operations.

The sale authorization marks a significant shift for Arctic LNG 2, which has become one of the most heavily sanctioned energy projects in the world.

The project’s first production train was completed as planned but its production has been constrained by sanctions. The second train remains only partially completed, with one production string finished, while construction of the third train has largely been suspended since 2024.

Recent signs suggest Novatek is attempting to revive the project. Large fabrication modules required for the third train have recently departed China and are en route to Russia, potentially allowing construction work to resume after a prolonged halt.

Yet even if construction progresses, shipping remains the project’s biggest obstacle.

Arctic LNG 2 was designed around a growing fleet of Arc7 icebreaking LNG carriers capable of navigating Arctic waters year-round. U.S. sanctions effectively halted delivery of many vessels originally intended for the project, leaving Novatek with an acute shortage of specialized tonnage.

Russia has spent the past two years assembling a shadow LNG fleet and redeploying available vessels, but analysts say transportation capacity remains far below what is needed to support full-scale production from all three trains.

The challenges facing Arctic LNG 2 stand in contrast to Yamal LNG, which continues exporting cargoes using an established Arc7 fleet operated largely by international shipping companies including Seapeak and Dynagas.

Those operators now face increasing uncertainty as Europe moves toward tighter restrictions on Russian LNG imports. European buyers have continued purchasing record volumes of LNG from Yamal LNG, helping sustain Russian Arctic gas exports despite broader sanctions on Moscow’s energy sector.

However, pending EU measures will make the European market inaccessible to Russian LNG over the coming months, raising questions about the future role of Western-linked shipowners in the trade.

Industry observers say TotalEnergies’ potential exit from Arctic LNG 2 may ultimately prove a test case for other Western stakeholders still connected to Russia’s Arctic LNG industry.

Pressure could eventually grow on shipping companies and vessel operators with exposure to Russia’s Arctic LNG supply chain to divest assets, transfer vessels or restructure ownership arrangements as Moscow seeks to preserve exports from both Yamal LNG and Arctic LNG 2.

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