Mitsui has decided to withdraw its employees from the Russian Arctic LNG-2 project, according to the Japanese newspaper Sankei. Mitsui declares its move as a result of the United States’ sanctions against the Arctic LNG-2 project as part of a package of far-reaching new measures against Moscow due to the war in Ukraine. This poses a further setback for the Arctic LNG-2 project.
Arctic LNG-2, located on the Gydan Peninsula north of the Arctic Circle, is a key element in Russia’s ambition to increase its share of the global liquefied natural gas market from the current 8% to 20% by 2030. The project is an important part of Russia’s economic ambitions and the first deliveries should have started around the first quarter of 2024. In terms of location, the production site is well positioned for the export of LNG supplies to Europe and Asia.
The project involves three LNG terminals, each with a capacity of 6.6 million tons of liquefied natural gas per year. The total LNG capacity of the three terminals is 19.8 million tons per year and around 1.6 million tons of stable gas condensate per year.
However, some Western companies have stepped away from their shares in the Russian LNG-2 project in the Arctic due to the sanctions. This was reported by the Moscow-based newspaper Kommersant on December 25, citing unnamed Russian government sources. Japan’s latest decision was taken particularly to protect Mitsui employees from restrictive measures by the USA, the newspaper states.
The common concerns of China and Japan, as important buyers of Russian LNG, have led to active diplomatic efforts to obtain exemptions from the US sanctions. However, the US government has taken a firm stance and explicitly stated its aim to stop the Arctic LNG-2 project.
The lack of long-term contracts could also lead to Novatek falling behind with its external financing of 9.5 billion euros (10.5 billion US dollars), Kommersant sources explain.
The owner of the Arctic LNG-2 project is the private company Novatek, Russia’s largest LNG producer, which holds a 60% share. The Chinese, French and Japanese companies, which held the remaining 40% of the shares, blamed force majeure for their withdrawal from the project.
The news agency Reuters reported last week that even Novatek had issued force majeure declarations to several customers for supply bottlenecks after the USA imposed sanctions on Russian liquefied natural gas in November 2023.
Lack of means of transportation
Another major challenge for Novatek is to build up a fleet of LNG tankers to shuttle between the Utrenneye loading station on the Gydan peninsula and the markets. The South Korean company Samsung Heavy Industries recently announced that it had not yet started manufacturing blocks and equipment for 10 of 15 Arctic LNG tankers.
According to Novatek, the first LNG tankers should set sail in the first quarter of next year. However, industry sources say that commercial LNG deliveries from the project are now not expected until the second quarter of 2024 at the earliest.
Heiner Kubny, PolarJournal
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