Report: Production starts at Russia’s Arctic LNG 2 despite US sanctions

Russia’s liquefied natural gas (LNG) producer Novatek has begun production at its Arctic LNG 2 project despite U.S. sanctions, media company Bloomberg reported.

Archive; Courtesy of Novatek

According to Bloomberg, Russia’s Deputy Prime Minister Alexander Novak said in an interview with the state-run Rossiya 24 TV channel that the first train of the Novatek-led Arctic LNG 2 project “has actually started operating,” and that the first shipments from the project are expected in the first quarter of 2024.

The facility, located on the Gydan peninsula above the Arctic Circle, is crucial for Russia’s goal to more than triple its LNG production to 100 million tons by the end of the decade, Bloomberg said, noting that the U.S. sanctions imposed on the project’s operator in November 2023 put that goal at risk.

To note, the Arctic LNG 2 project includes the construction of three LNG trains, with a capacity of 6.6 million tons per annum (mtpa) of LNG each.

Novatek’s participation interest in the project is 60%, while TotalEnergies, CNPC, CNOOC and Japan Arctic LNG hold 10% each.

There were 21 ice-class tankers ordered for the project, including six vessels at South Korea’s Hanwha Ocean, formerly known as Daewoo Shipbuilding & Marine Engineering (DSME), and 15 LNG carriers at Russia’s shipyard Zvezda.

South Korean shipbuilder Samsung Heavy Industries (SHI) ceased the production of blocks and equipment for 10 out of the 15 Arctic LNG carriers contracted with Zvezda, Reuters reported. However, it’s important to note that as of now, there has been no formal cancellation of the contract, as stated by the Samsung spokesperson.

In the aftermath of economic sanctions imposed in 2022, Hanwha Ocean decided to terminate a contract with Sovcomflot for three ships, citing non-payment as the primary reason and subsequently ceasing construction.