U.S. Sanctions Send Russian LNG Modules Back to China’s Wison Yard

By Malte Humpert (gCaptain) –

After a three-month odyssey aboard Chinese heavy lift vessel Wei Xiao Tian Shi, two Russia-bound LNG modules are headed back to China. 

Two weeks after Wison New Energies announced the cessation of all work with Russia, two modules for Novatek’s Arctic LNG 2 project are set to return to China just days before arriving in Russia, a source at Wison’s Zhoushan yard confirmed to gCaptain on condition of anonymity as they were not authorized to comment on the matter.

The threat of U.S. sanctions appears to now affect Chinese business decisions related to Russian energy projects.

It was not immediately apparent if the decision to recall the modules to China originated with the manufacturer, Wison New Energies, or with the vessel’s owner, Hainan Smiling Angel Shipping.

U.S sanctions have recently targeted both Chinese construction yards and operators of heavy lift vessels. 

Wison New Energies last month announced that it would cease all business with Russia and would sell its Zhoushan construction yard. The Zhoushan facility has assembled a dozen key modules for all three trains of Arctic LNG 2.

The company’s decision came just days after a different Chinese yard producing modules for Novatek, PengLai Jutal Offshore Engineering Heavy Industries (PJOE), was sanctioned by the U.S. highlighting the potential risk Wison New Energies would take if it were to continue delivering modules to Russia. 

It would likely also place in doubt a new $1bn contract from Kuala Lumpur-based Genting for the construction of a floating liquefied natural gas (FLNG) facility Wison New Energies secured last month. 

Hainan Smiling Angel Shipping, the vessel’s owner, may also no longer wish to deliver the modules for fear of being sanctioned. 

Weeks after Wei Xiao Tian Shi picked up the modules the U.S. Office of Foreign Assets Control levied sanctions against Chinese Guangdong Nan Feng Shipping and its vessel Hunter Star. Singapore-based Red Box, operator of Audax and Pugnax, was also blocked. 

All three vessels have carried liquefaction modules to Novatek’s construction yard Belokamenka near Murmansk after the U.S. designated the Arctic LNG 2 project and related entities. 

Neither Wison New Energies nor Hainan Smiling Angel Shipping responded to requests for comment. 

Wei Xiao Tian Shi loaded two 14,000-ton pipe-rack modules for Train 3 of Novatek’s Arctic LNG 2 project at the end of March. The vessel departed from the Wison Yard in Zhoushan on March 29, 2024. 

After passing through the South China Sea, the Indian Ocean, and most of the Atlantic Ocean the vessel remained offshore of the Azores for most of May and zigzagged in international waters off the Faroe Islands throughout June. It has now reversed course heading for Gibraltar based on AIS data.

Wei Xiao Tian Shi’s unusually lengthy voyage had already suggested that the evolving U.S. sanctions regime increasingly complicated the delivery of modules. The vessel’s course reversal back to the south seemingly confirms that the modules are beginning their journey back to China. 

“That’s the only explanation. Because I am 100 percent sure that Novatek wants these modules as soon as possible,” remarked an industry insider familiar with Novatek’s operation off the record. 

Another source at Wison’s Zhoushan facility, again commenting off the record due to the sensitive nature of the topic, suggested that Novatek is becoming increasingly concerned about additional Chinese yards and shipping companies being sanctioned and has thus delayed taking delivery of any modules for Train 3. 

In addition to the modules aboard Wei Xiao Tian Shi, two further units remain at Wison’s Zhoushan yard.

Novatek, the Arctic LNG 2 project, the Belokamenka assembly yard, as well as the transfer of liquefaction technology to Russia have all been blocked by Western sanctions.

The U.S. has long been bent on “killing the ALNG 2 project.” Its sanctions have been most successful in blocking the delivery of key Arc7 ice-capable LNG carriers. The status of up to six such vessels remains in limbo at a Hanwha Ocean shipyard in South Korea.

In contrast, Western measures have proven much less effective in halting the construction of the Arctic LNG 2 project itself, though they have caused moderate delays in the completion of Train 1 and 2, with the status of Train 3 remaining uncertain.

If some Chinese construction yards and shipping companies now shy away from assembling and carrying LNG modules for fear of sanctions, Novatek’s current and future LNG plans, including Murmansk LNG, could face significant headwinds.