Novatek, Russia's largest liquefied natural gas (LNG) producer, has suspended operations at its newest Arctic LNG 2 plant due to sanctions and a shortage of LNG tankers.
Why did Novatek stop working?
Reuters reported that the company launched the first of three lines of the new LNG plant only in December last year but had to stop it, citing two sources.
One of the agency's interlocutors clarified that the line will not work until at least the end of June.
At the same time, construction work on the project continues; two more lines are planned to be delivered to the site by sea from the port of Murmansk later. Together, they will produce 19.8 million metric tons of LNG annually and 1.6 million tons per year of stable gas condensate.
According to the agency, Arctic LNG 2's main problem is currently the shortage of special tankers capable of transporting liquefied gas cooled to minus 163 degrees Celsius.
According to Novatek, 15 Arc7 ice-class tankers capable of cutting through ice 2 meters thick will be built for Arctic LNG 2 at the Russian shipyard "Zvezda". Another six tankers were to be built by the Korean company Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering). However, due to sanctions against the Russian Federation, at least half of this order was canceled.
According to public information, only three gas tankers suitable for Arctic LNG 2 have been built.
Russian Deputy Prime Minister Oleksandr Novak, answering a question about when the first cargo from the new LNG plant will be delivered, said, "the company is dealing with the issues, and relevant negotiations are underway."
Their main problem is tankers, the Russian official admitted.
Ronald Smith, senior oil and gas analyst at Russian brokerage BCS, notes that it is currently unclear when and where Arctic LNG 2 will be able to find tankers.
What is known about the company "Novatek"
Novatek planned to start exporting gas from the Arctic LNG 2 plant in the first quarter of this year. However, after introducing US sanctions on this project, the company was forced to declare force majeure due to its obligations to customers.
The $21.3 billion Arctic LNG 2 project involves the construction of three lines for the production of liquefied natural gas with a capacity of 6.6 million tons per year each in the Yamalo-Nenets Autonomous District of the Russian Federation. As of the end of 2021, the overall readiness of the project was estimated at 59%, the first stage at 78%.
At the end of 2021, Arctic LNG 2 agreed to attract project financing for 9.5 billion euros and has already repaid part of Novatek's contribution (the project's largest shareholder). However, the project company cannot raise funds in dollars due to US sanctions introduced in 2014.
