Samsung Cancels Order For Icebreaking Gas Carriers For Russia’s Sanctioned Arctic LNG 2 Project

South Korean shipbuilder Samsung Heavy Industries (SHI) has terminated a contract to build icebreaking LNG carriers in partnership with Russia’s Zvezda shipyard. The ships were intended for transport of liquefied natural gas from Novatek’s flagship Arctic LNG 2 project.

In total Samsung had been contracted to build hulls for 15 ice-class Arc7 carriers. It delivered hulls for the first five vessels from a 2019 contract to Zvezda before Western sanctions placed the cooperation on hold, though none of the vessels have been commissioned. 

SHI signed additional contracts with the Zvezda Shipbuilding Complex in 2020 and 2021 to supply hull blocks and equipment for 10 more icebreaking LNGC as well as seven ice-class shuttle tankers for a total value of $3.5bn, with $2.04bn coming from the gas carriers. 

Last year Zvezda unilaterally terminated these agreements due to contract default and demanded repayment of around $800m. SHI claimed force majeure, arguing that it had to suspend work on the vessels in February 2022 due to U.S. and South Korean sanctions. 

The company filed an arbitration request with Singapore’s arbitration court in July 2024 following Zvezda’s termination. With no resolution in sight and mounting sanctions SHI has now moved to cancel the two contracts from its side. It plans to sue the Russian yard for damages. 

“The fundamental cause is the illegal termination of the contract by the shipowner. We are in the process of assessing the damage caused by the unlawful cancellation,” Samsung Heavy Industries said on Wednesday in a stock market filing. “We intend to prove the illegality of the termination and recover rightful compensation through international arbitration,” it continued.

The lead carrier, largely built by SHI, Alexey Kosygin, left the Zvezda yard in December 2024 to conduct sea and gas trials. It still needs to conduct ice trials before it can enter into service. The timeline for its commissioning has been pushed back several times from 2023, with the status of subsequent vessels also uncertain.

The Zvezda yard has struggled to deliver much-needed oil and gas carriers for Russia’s Arctic energy projects. By some estimates Russia requires hundreds of ice-capable tankers and cargo ships to implement its Arctic development agenda.

The Russian yard is also building the world’s largest nuclear icebreaker, the Leader-class, though webcam footage at the yard shows little progress on the vessel. It is now not expected to launch before 2030. The Leader-class icebreaker is designed to ensure year-round navigation across Russia’s Northern Sea Route to export oil and gas to Asia.

Samsung’s contract cancellation is not expected to affect operation of Arctic LNG 2 in the near-term. For the past year the project’s majority owner, Novatek, has been unable to find buyers for its super-cooled gas willing to defy U.S. sanctions. However, if the company intends to run the plant at full capacity in the future it will need to source around 15 high ice-class carriers.

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