Foreign Stakeholders Freezing Participation in "Arctic LNG 2" Project After Force Majeure Announcement
February 13, 2025

Foreign stakeholders have frozen their participation in the "Arctic LNG 2" project by Novatek following the declaration of force majeure. This was reported by "Kommersant" on December 25, citing government sources.

According to the publication, international companies announced force majeure after Reuters reported that Novatek had informed clients of force majeure on LNG deliveries from its portfolio. This could lead to "Arctic LNG 2" losing long-term LNG export contracts, with Novatek having to self-finance the project. In the meantime, Chinese and Japanese companies have approached US authorities to request LNG deliveries be exempt from sanctions. Due to the uncertainty, the project will be forced to sell gas on the spot market. One of the issues that remains is the availability of ice-class tankers for transporting LNG from the Kara Sea.

"Arctic LNG 2" is a joint venture between Novatek (60%), TotalEnergies (10%), Chinese corporations CNPC (10%) and CNOOC (10%), as well as a consortium of Japanese companies Mitsui and Jogmec (10%).

The project involves the construction of three liquefied natural gas production lines in the Ob Bay of the Kara Sea, with a total capacity of 19.8 million tons of LNG per year and up to 1.6 million tons of stable gas condensate per year. The first platform with a technological line for the plant was delivered to the "Utterny" terminal in August 2023.

Sanctions imposed by the US on "Arctic LNG 2" on November 2 prohibit US legal entities from conducting transactions with the project. However, transactions necessary to exit the capital and debt obligations of the sanctioned company are allowed until January 31, 2024. According to Novatek's CEO, Leonid Michelson, these actions could be aimed at maintaining high prices in the LNG market.

A contract for building the first ice-class LNG tanker Arc7 was signed between Sovcomflot and SSK Zvezda in April 2019. Additional contracts were signed for the construction of 14 similar tankers. Samsung Heavy Industries was chosen as the technological partner for this series. The first domestic LNG tanker was expected to be delivered in March 2023, but the delivery date has been postponed to 2024. Additionally, six Arctic LNG carriers for "Arctic LNG 2" were planned to be built in South Korea.

Photo: Sudostroenie.info