Novatek (NVTK.MM), Russia’s leading liquefied natural gas (LNG) producer, has temporarily suspended operations at its Arctic LNG 2 venture due to a combination of sanctions and a scarcity of gas tankers, as disclosed by two reliable sources to Reuters on Tuesday. The project, which had aimed to commence commercial deliveries in the first quarter of this year, faced setbacks after being subjected to Western sanctions last year in response to Russia’s involvement in the Ukraine conflict. Consequently, foreign stakeholders halted their involvement, and Novatek declared a force majeure event.
The decision to halt the conversion of natural gas into LNG deals a blow to Russia’s ambition of capturing a significant share of the global LNG market by 2030-2035. Currently ranked as the world’s fourth-largest LNG producer with annual exports totaling 32.6 million metric tons, Russia’s aspirations have been impeded by the suspension at Arctic LNG 2. Novatek initiated limited LNG production at the project’s first train in December but has refrained from providing official comments on the recent developments. According to sources, the first train will remain inactive until at least the end of June, with construction activities continuing at the site.
The subsequent two trains are expected to be transported by sea from Murmansk to the project location in the future. Collectively, the three trains are projected to yield 19.8 million metric tons per year of LNG and 1.6 million tons per year of stable gas condensate. The primary obstacle cited for the suspension is the shortage of specialized tankers capable of transporting LNG under extreme conditions, including navigating through thick sea ice.
Additionally, reports from Vedomosti newspaper highlighted a significant decline in natural gas output at the project in February, with production levels dropping to 83 million cubic meters (mcm) due to delays in LNG shipments. This marked a notable decrease from 425 mcm in December and 250 mcm in January.