Novatek Proceeds With Arctic LNG 2 Despite New Sanctions on Russia

Despite increased sanctions pressure from the West, Russia’s LNG developer and exporter Novatek prepares to begin delivery of the equipment and structure for the second stage of its Arctic LNG 2 project at the end of July, Reuters reported on Thursday, quoting sources with knowledge of the plans.

The deliveries of the foundation structures, the so-called gravity-based structures (GBS), will begin between July 22 and 25 from a plant in the Murmansk region, according to one of Reuters’ sources. 

Novatek’s Arctic LNG 2 project has seen months of delays and has yet to ship its first LNG cargo after U.S. sanctions on Arctic LNG 2 upended the company’s plans for production start-up and export timelines.

In November, the U.S. Department of State designated limited liability company ARCTIC LNG 2, the operator of the Arctic LNG 2 Project, as part of additional sanctions against Russia “to further target individuals and entities associated with Russia’s war effort and other malign activities.”

Located in the Gydan Peninsula in the Arctic, the Arctic LNG 2 project has been considered key to Russia’s efforts to boost its global LNG market share from 8% to 20% by 2030-2035.

However, foreign shareholders suspended participation in the Arctic LNG 2 project after the Biden Administration announced the new sanctions, effectively withdrawing from the financing of the project and for offtake contracts for the new plant.

Potential contract cancellations for the construction of ice-class LNG carriers and the sanctions on Arctic LNG 2 could hamper Russia’s plans to boost LNG sales now that its pipeline route to Europe is largely cut off.

The EU added insult to injury this week as it banned new investments, as well as the provision of goods, technology, and services for the completion of Russian LNG projects under construction, such as Arctic LNG 2 and Murmansk LNG, in the first sanctions targeting Russia’s gas sector.

Furthermore, Chinese engineering company Wison New Energies discontinued all ongoing Russian projects and will immediately and indefinitely stop taking any new Russian business, dealing a blow to Arctic LNG 2, for which Wison was to supply equipment for a gas turbine power station for the plant.

By Tsvetana Paraskova for Oilprice.com

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