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Russia scraps largest gas project due to US sanctions

Russia scraps largest gas project due to US sanctions Russia closes its largest gas project due to sanctions (Getty Images)
Author: Maria Kholina

The energy giant Novatek is forced to scale back its massive Arctic LNG-2 project after Western sanctions limited its access to ice-class tankers, instead focusing on developing its project in the ice-free port of Murmansk, according to Reuters.

The Arctic LNG-2 project was set to become Russia's largest plant of its kind, with an ultimate capacity of 19.8 million tons of LNG per year and 1.6 million tons of stable gas condensate per year across three lines.

The company began production of liquefied natural gas (LNG) on the first line of Arctic LNG-2 in December, but fell behind schedule for delivering the first gas batches from the project due to a lack of ice-class gas carriers.

Sources reported that methane conversion to liquid at a temperature of minus 163 Celsius is currently suspended at the plant.

The second and third lines were supposed to start operating in 2024 and 2026, respectively, with the second production line currently under construction at the Belokamenka plant in the Murmansk region.

However, the third line might be diverted to the Murmansk LNG plant, announced by Novatek last June.

"An option is being considered is to send a second gravity platform for Arctic LNG-2 in the summer, and to use a third one for Murmansk LNG," a source familiar with the plans said.

New project

The Murmansk LNG project is expected to be even larger than Arctic LNG-2, with a final capacity of 20.4 million tons per year. Production for the first two lines is planned to start by the end of 2027, with the launch of the last line scheduled for 2029.

One of the advantages of the Murmansk project compared to Arctic LNG-2 will be access to the ice-free port in the Barents Sea.

"All attention now is on Murmansk, the ice-class tankers are not necessary there," said the source.

US sanctions

Plans for Arctic LNG-2 were complicated last year when it was included in Western sanctions due to Russia's invasion of Ukraine, prompting foreign shareholders to freeze their participation and Novatek to declare force majeure circumstances.

US Assistant Secretary of State for Energy Affairs Jeffrey Payette stated that Washington aims to "strangle" this Russian project.

Novatek also failed to secure a sufficient number of ice-class gas carriers as foreign partners were deterred by sanctions.

The head of TotalEnergies, a participant in the Arctic LNG-2 project, announced in February that the third phase of the project had been halted, but the second phase is likely to proceed.