A trio of ice-breaking Arc7 LNG carriers being built by Japan’s Mitsui OSK Lines for Russia’s Arctic LNG 2 project have not been included under the US’ sweeping new sanctions package announced on Friday but are being delayed at shipbuilder Hanwha Ocean.
Answering questions from TradeWinds, MOL said: “We are aware that the US/EU/UK’s new package of sanctions was announced last Friday and a number of Sovcomflot-related vessels were sanctioned by the US.
“Our three ice-breaking vessels were not on the sanction list,” the company clarified.
The 172,600-cbm trio was ordered in September 2020 against long-term contracts with Russian energy company Novatek, which is leading the development of the under-construction Arctic LNG 2 project.
The Japanese owner said at the time that the charter deals had been signed by a subsidiary with Novatek Gas & Power Asia.
MOL said the delivery times for the three ships have now been delayed but did not disclose new handover dates.
The company said this is due to labour force shortages at the shipyard — a problem it said is being experienced by all South Korean yards, including Hanwha Ocean.
In 2020, the company said all three ships were scheduled for handover in 2024.
“We are not seeing immediate effect to the three vessels from the newly announced sanctions,” MOL said.
“MOL will continue to comply with laws and regulations, including sanctions taken by the international community, and will take appropriate measures in cooperation with stakeholders, including the Japanese government.”
Clarksons Shipping Intelligence Network currently lists the vessels — the Ilya Mechnikov, Nikolay Semenov and Nikolay Basov — as due for handover in March 2024, with the final vessel for delivery in 2026.
Complicated
Speaking in India in February, MOL president and chief executive Takeshi Hashimoto was asked about its three Arc7 LNG newbuildings.
“Our contractual obligation is that if we cannot provide the service to Arctic 2, we have to sell our vessel to Arctic 2,” Hashimoto said.
But he added: “There is a sanction that says we should not do that deal with Arctic. So it’s a bit complicated.”
On Friday — on the eve of the second anniversary of Russia’s invasion of Ukraine and following the death in custody of Russian government critic Alexei Navalny — the US rolled out a swathe of new sanctions against Russian companies, persons and ships.
These included a trio of Arc7 vessels that were originally contracted by Russian shipowner Sovcomflot against long-term time charters with Novatek.
Sanctions sweep
The US Treasury Department’s Office of Foreign Assets Control included Elixon Shipping, Azoria Shipping and Glorina Shipping on its new sanctions list on Friday. These are the three single-purpose shipowning entities of three Arc7 newbuildings under construction at Hanwha Ocean that were originally contracted by Sovcomflot.
Hanwha Ocean, then Daewoo Shipbuilding & Marine Engineering, cancelled the newbuilding contracts on all three Sovcomflot ships in 2022 as Western sanctions against Russia made it increasingly difficult for foreign equipment suppliers and contractors to work on the vessels.
The shipbuilder, which is now controlled by Hanwha Group, opted to continue building the trio for its own account.
Ofac also listed Smart LNG — a joint venture between Sovcomflot and energy company Novatek — as a sanctioned entity. The company was to own all but one of the 21 LNG carrier newbuildings for Arctic LNG 2.
Zvezda Shipbuilding Complex, which is completing a further five of the Arc7 newbuildings for Arctic LNG 2, was also named as a sanctioned entity by the US.
A contract with Samsung Heavy Industries on 10 more LNG newbuildings that were to be completed by Zvezda has been “suspended”, SHI recently clarified to TradeWinds.
The UK and European Union have also slapped sanctions on Russia’s Arctic LNG 2.
