Russia’s Arctic LNG 2 Production Hit by U.S. Sanctions

By Bloomberg News (Bloomberg) —

Russia’s biggest producer of liquefied natural gas in June cut processing at its Arctic LNG 2 facility to the lowest level since February, after US sanctions curtailed export options.

The Novatek PJSC-led plant, processed slightly more than 8 million cubic meters of gas last month, according to a person with knowledge of industry data. That’s nearly half of the runs in May, a comparison with past figures shows. 

While the data don’t specify that the volumes were liquefied, similar information for Novatek’s operational Yamal LNG project would suggest that’s the case.

Novatek didn’t immediately respond to a request for comment.

Russia’s LNG industry has become a target of Western sanctions as the US and its allies work to reduce the Kremlin’s revenue from energy exports amid the war in Ukraine. Arctic LNG 2 had been key to Moscow’s plans to triple production of the super-chilled fuel by the end of decade.

The US first sanctioned the plant last November. Since then, it has imposed curbs on other Novatek LNG projects, as well as some tankers designed to export cargoes from Arctic LNG 2. European Union sanctions, set to kick in next year, are intended to limit port access and transshipment options for Russian LNG cargoes. There are signs that Russia may now be amassing a shadow fleet to ship the super-chilled fuel despite the sanctions.

Exports from the first train of Arctic LNG 2, which has an annual production capacity of 6.6 million tons, were initially scheduled to start in the first quarter of this year, but the Western restrictions have delayed them indefinitely. 

However, last week Novatek sent a second production train to the installation site on the Arctic Gydan peninsula, according to Kommersant newspaper. That train, set to have the same capacity as the first, will reach the site in mid-August, even as the future of the facility remains in limbo.

Gas production at the fields that feed Arctic LNG shrank to 34.2 million cubic meters in June, a five-month low, the person said, citing industry data. Some of the produced gas was used for the plant’s own needs, the person said.

© 2024 Bloomberg L.P.

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