Russian energy company Novatek has started production at its Arctic LNG 2 plant but is faced with a series of major challenges that are likely to slow planned exports from the new liquefaction development.
Widespread project watchers said this week that initial volumes of LNG would appear to have been produced from the first of three 6.6 million tonnes per annum gravity-based liquefaction units on the Gydan Peninsula in the Russian Arctic.
Data provider iGIS/LNG said flaring on site started five weeks ago and has been continuing at “an incredible rate” since with some variability. The company said Novatek will also need these first volumes to cool down its large 220,000-cbm storage tank and so is likely dealing with large boil-off gas issues.
There are also questions being asked as to whether the project is missing some equipment required for this first train which it has been unable to import due to European sanctions imposed on Russia following its invasion of Ukraine in 2022.
Today reports emerged that LNG buyers from Arctic LNG 2 — including China’s Shenergy, ENN, Zhejiang Energy, Repsol of Spain and Japanese trader JERA — had received force majeure notices relating to supplies from the project.
Those following the 19.8-million tonne per annum Arctic LNG 2 also pointed to the fact that the specialised shipping for this project has yet to be delivered.
The project’s flagship vessel, Sovcomflot’s 172,600-cbm Arc7 LNG carrier Alexey Kosygin was named at the Zvezda Shipbuilding Complex in September with Russian President Vladimir Putin attending the event.
It is unclear if this vessel is complete and ready for operations. The specialised ice-breaking LNG carrier was originally due to take the Northern Sea Route during the summer months of 2023 to lift the first volumes from the now-delayed plant.
The other 14 sisterships were contracted by Novatek-Sovcomflot joint venture Smart LNG at Zvezda working with Samsung Heavy Industries. But to date, just five hulls have been delivered with the agreement on the remaining 10 believed to have been cancelled.
Overarching the physical start-up and logistics issues, the US has sanctioned Arctic LNG 2 project.
It has also slapped sanctions on the two giant floating storage units newbuildings, — the 361,600-cbm Saam FSU and Koryak FSU — which were put into place in Ura Bay off Murmansk and Bechevinskaya Bay off Kamchatka Peninsula, at either end of the Northern Sea Route.
Novatek plans to use its Arc7 fleet, which also comprises 15 trading vessels that export cargoes from its first Arctic-based project Yamal LNG, to ship volumes to the FSUs and move them onward from the units using conventional LNG carriers.
US officials have said openly that the sanctions are designed to reduce the revenue Russia earns from its energy exports.
Speaking about Arctic LNG 2 US Assistant Secretary for Energy Resources Geoffrey Pyatt said: “Our objective is to kill that project.”
