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Reuters: Russia's LNG ambitions stalled by sanctions, lack of tankers

by Abbey Fenbert December 23, 2023 2:35 AM 2 min read
A flowing wellhead at the Utrenneye field, the resource base for Novatek's Arctic LNG 2 project in the Gydan Peninsula, as seen on Nov. 30, 2021. (Natalia Kolesnikova / AFP via Getty Images)
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A shortage of gas tankers and pressure from international sanctions are hindering Russia's plans of becoming a leading exporter of liquefied natural gas (LNG), Reuters reported Dec. 22.

Russia hoped to increase its share of the global LNG market from 8% to 20% by 2030, offsetting the economic impact of sanctions on Russian pipeline gas exports.

A key component of Russia's ambitions is the Arctic LNG 2 project, which was set to begin shipping in the first quarter of 2024. Located on the Arctic's Gydan Peninsula, Arctic LNG 2 is positioned to export LNG supplies to both Europe and Asia, and the project's  intended capacity is 19.8 million metric tons annually.

The project is run by the private company Novatek, Russia's largest producer of LNG. Reuters reported that Novatek issued force majeure declarations to multiple clients after the U.S. imposed sanctions against Russian LNG in November 2023.

Businesses may declare force majeure if they cannot supply promised goods or services due to circumstances beyond their control.

According to Reuters, industry sources say that Arctic LNG 2 will not be able to ship commercial LNG supplies before the second quarter of 2024.

Sanctions have reportedly cut into the project's supply of Arc7 tankers, which can cut through ice two meters thick. The company Hanwha Ocean, formerly Daewoo Shipbuilding & Marine Engineering, said it canceled three Russian orders of Arc7 tankers due to sanctions.

Public records indicate that Arctic LNG 2 currently has only three gas tankers capable of transporting deliveries through the ice.

Russian economist Andrey Klepach told a gas forum that the project is not likely to have the infrastructure it needs until after 203o.  

"I think it's not only about icebreakers, but the ice-class gas carriers — there are no such vessels yet," Klepach said.

The EU has not yet sanctioned Russian LNG, but is considering imposing further restrictions. While pipeline imports to EU countries dropped sharply after the full-scale invasion of Ukraine, Europe imported a record volume of LNG in 2023.

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