Russia is hoping its shipments of liquefied natural gas (LNG) will offset a sharp fall in pipeline gas exports to Europe, but a shortage of gas tankers and sanctions hold back its plans, analysts and industry sources said, says an article published on Reuters website.
Summary
- Russia’s plans to increase its liquefied natural gas (LNG) shipments to offset the decline in pipeline gas exports to Europe are facing setbacks due to a critical shortage of gas tankers and international sanctions.
- Russia aims to expand its share in the global LNG market from the current 8% to 20% by 2030. However, Novatek, Russia’s top LNG producer, declared force majeure on LNG supplies from its Arctic LNG 2 project due to sanctions.
- The Arctic LNG 2 project, designed to produce 19.8 million metric tons of LNG annually, is facing supply delays and might not begin commercial LNG supplies until the second quarter of 2024.
- Russia plans to utilize the Northern Sea Route across the Arctic Ocean to transport LNG to eastern markets, but navigating through thick ice and harsh Arctic conditions presents significant logistical challenges.
Challenges In Arctic LNG Development
In Moscow, on December 22, it was reported that Russia’s plans to increase its liquefied natural gas (LNG) shipments as a counterbalance to the decline in pipeline gas exports to Europe are facing significant setbacks. According to analysts and industry sources, a critical shortage of gas tankers, compounded by international sanctions, is impeding these plans.
Novatek’s Struggles And Sanctions Impact
Russia aims to expand its share in the global LNG market from the current 8% to 20% by 2030. However, this goal seems increasingly challenging as Novatek, Russia’s top LNG producer, declared force majeure on LNG supplies from its Arctic LNG 2 project due to sanctions.
This declaration follows the United States’ recent sanctions on Arctic LNG 2, which is expected to commence production by late this year or early 2024. Furthermore, the European Union is contemplating similar restrictions on Russian LNG exports.
Arctic LNG 2 Project And Supply Delays
Arctic LNG 2, with its three production units (trains), is designed to produce 19.8 million metric tons of LNG annually, plus 1.6 million tons of stable gas condensate. Initially, the project’s first LNG tankers were scheduled to depart in early 2023. However, sources now indicate that commercial LNG supplies from this project might not begin until the second quarter of 2024.
Northern Sea Route And Logistics Challenges
Russia plans to utilize the Northern Sea Route across the Arctic Ocean to transport LNG to eastern markets, potentially reducing delivery times to Asia by up to 40% compared to the Suez Canal route. Nevertheless, navigating through thick ice and harsh Arctic conditions presents significant logistical challenges.
Shortage Of Ice-Class Tankers
Novatek has announced plans for the construction of 15 Arc7 ice-class tankers, capable of traversing 2-meter thick ice, at Russia’s Zvezda shipyard for the Arctic LNG 2 project.
Additionally, six more tankers were to be built by Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering). Still, sanctions have led to the cancellation of three tankers ordered by Russia’s Sovcomflot. Currently, only three suitable tankers – Alexei Kosygin, Pyotr Stolypin, and Sergei Witte – have been publicly reported as built for Arctic LNG 2.
Infrastructure Delays
Andrei Klepach, chief economist at state lender VEB, mentioned at a gas forum that the necessary infrastructure, including ice-class gas carriers, is unlikely to be ready before 2030. Sovcomflot indicated a one-year delay in constructing these carriers, with availability now projected for 2024.
Stakeholders In Arctic LNG 2
The Arctic LNG 2 project is led by Novatek with a 60% stake. Other significant stakeholders include TotalEnergies (France), CNPC (China), and the Japan Arctic LNG consortium, each holding a 10% share.
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Source: Reuters
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