U.S. Sanctions Force Temporary Shutdown of Russia’s Arctic LNG 2 Project

By Malte Humpert (gCaptain) –

Western sanctions appear to have forced the shutdown of Russia’s flagship liquefied gas project, Arctic LNG 2, for the winter months. According to industry sources production at the facility on the Gydan peninsula was halted on October 11, less than three months after it was restarted. This represents the second stoppage following a prior shut down in April 2024.

The project managed to load eight cargoes aboard shadow fleet LNG carriers since the beginning of August 2024. The last pickup came almost three weeks ago on October 7 leading to speculation that production had been slowed down or ceased altogether. Arctic LNG 2 has been unable to find buyers for its LNG with all cargoes remaining aboard a number of LNG carriers and two floating storage units (FSU) Saam and Koryak near Murmansk and in Kamchatka. More than 1 millions cubic meters of LNG remain undelivered.

Satellite images confirm much-reduced flaring activity at the project after October 11 seemingly confirming the cessation of production.

The reason for the shutdown is likely two-fold. A lack of appetite among buyers to offtake sanctioned Russian LNG at the risk of secondary sanctions and a lack of ice-capable vessels. With winter fast-approaching the project is dependent on high ice-class LNG carriers of which it has none. 

Five completed Arc7 ice-class vessels ordered from South Korean Hanwha remain in sanctions limbo. Russia’s own Zvezda shipyard had reportedly aimed to deliver two Arc7 carriers by the end of the year and early in 2025. But even with ice-capable vessels, the lack of buyers, even at substantial discounts, looms large. 

The project could aim to restart production next summer when regular LNG carriers can once again reach the project. However, a lengthy shut in exceeding six months will be difficult to implement and may require months of preparation to restart production without risking damage to the reservoir. The previous shutdown lasted less than four months between April and July 2024.

Despite the impact of Western sanctions, Arctic LNG 2’s majority owner, Russian major Novatek, intends to complete all three trains of the 19.8mtpa project. Power generation modules from Chinese suppliers Wison New Energies for the second production line are on track to arrive at the project next week.

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