utrenneye gas field arctic lng 2 resource base

Russia’s major gas project Arctic LNG-2 stalls under sanctions

October 30, 2024

By Ukraine

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Russia’s Arctic LNG-2 project has halted operations due to sanctions-related sales difficulties, Bloomberg reports, citing sources familiar with the matter.

The $25 billion liquefied natural gas venture, launched by President Vladimir Putin in 2023, has been unable to sell any LNG shipments since August despite offering discounts of up to 40%.

“All ordered vessels of this type fell under restrictions, leaving the project without a transport solution, and attempts to resolve the situation failed,” explains oil and gas sector analyst Mikhail Krutihin in an interview with Voice of America’s Russian Service.

The shutdown of Arctic LNG-2 represents a significant strategic setback for Russia’s energy ambitions, potentially limiting Moscow’s ability to fund its war against Ukraine through expanded gas exports. The project’s failure, triggered by sanctions imposed in response to Russia’s invasion of Ukraine, demonstrates the effectiveness of targeted Western restrictions on Russia’s energy sector, which has been a crucial source of revenue for its military operations.

According to Bloomberg’s sources, the project’s production dropped by more than half in October compared to the previous month, with commercial gas liquefaction completely stopped. Only essential maintenance operations continue, according to the sources.

Arctic LNG-2, operated by Novatek, was meant to help Russia increase its global LNG market share from pre-war 8% to 20% by 2030. It has a planned capacity of 19.8 million tons per year across three production lines.

The sanctions have affected all project stakeholders, including France’s TotalEnergies and several Chinese and Japanese companies.

“Due to sanctions, they declared force majeure, stating that all contracts for gas purchases from Arctic LNG-2 are considered invalid,” Krutihin said.

The construction of the third production line has been postponed from 2026 to 2028. US Assistant Secretary of Energy Jeffrey Pyatt has indicated that his department closely monitors the movement of sanctioned Russian LNG, with the Biden administration maintaining a firm stance on this issue.

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