Russia Restarts LNG Exports From US-Sanctioned Arctic LNG 2 Facility
Russia is once again trying to restart liquefied natural gas (LNG) exports from its Arctic LNG 2 project, months after Western sanctions forced operations to slow down.
Ship-tracking data and satellite images reveal that an LNG tanker has arrived at the Arctic LNG 2 export terminal for the first time since October 2024.
The facility, located in northern Russia, had been seen as a major part of Moscow’s plan to triple LNG exports by 2030. But it has remained idle after failing to find international buyers willing to go against US-led sanctions.
The vessel currently docked, named Iris, is an Arc4-class ship. It has a reinforced hull that allows it to travel through the ice-covered Arctic waters. This kind of ship can take the shorter northern sea route to Asia during the summer months when ice levels drop.
Russia is looking to expand LNG exports to replace the income lost from its reduced gas pipeline supply to Europe, which has fallen sharply since the war in Ukraine began in 2022. Exporting gas via ships is now seen as a key source of revenue.
The country has quietly built up a “shadow fleet” of at least 13 vessels to support Arctic LNG 2, many of which can operate in icy conditions. Some of these ships have changed management companies multiple times, possibly to hide their real ownership.
Bloomberg’s tracking data shows that the current fleet includes four ice-class LNG tankers, one docked at the Arctic LNG 2 terminal and three idled in the Barents Sea, along with three regular LNG tankers also in the Barents Sea.
Additionally, two LNG vessels are undergoing repairs in China, with a third one on its way. Another tanker is positioned near floating storage in Russia’s Far East, while two more tankers are idle in the Gulf of Finland, previously used for the sanctioned Portovaya gas project.
Experts say this fleet gives Russia enough power to move gas, but only if buyers are willing to take the cargo. Malte Humpert from the Washington-based Arctic Institute said in an email that Russia currently has more vessels available than it did last year, and this fleet would be sufficient to transport gas, if buyers are found.
Between August and October 2024, eight LNG shipments left Arctic LNG 2, but none reached foreign ports. Instead, the gas was moved to two storage units, one in the Barents Sea and the other in Russia’s Far East. Large-scale production stopped in October after ice blocked the area and made it too difficult for regular tankers to operate.
Russia’s first domestically built ice-class LNG tanker might be ready by the second half of this year, according to Sovcomflot CEO Igor Tonkovidov. He told Interfax that the vessel is undergoing sea trials.
Selling more gas would help bring down global prices and ease pressure on the country’s gas storage. But buyers may still be cautious due to the risk of violating sanctions.
Traders with knowledge of the situation said Russian officials involved with Arctic LNG 2 have continued to visit countries like India and China in the past year to look for customers. But it is not clear if any agreements have been signed.
Jan-Eric Fahnrich, an analyst at Rystad Energy, said the biggest hurdles are still finding buyers and enough shipping capacity. He added that Novatek, the majority shareholder of Arctic LNG 2, will likely offer discounted prices and target customers in Asia.
China is seen as the most likely buyer, but demand there has been falling for the past eight months. Malte Humpert pointed out that over one million cubic meters of LNG loaded last year still remains unsold and is currently stored in floating storage.
Satellite images from June 25 show two production units at the Arctic LNG 2 site flaring gas. This could mean that the units are either in operation or cooling down. Without regular exports, storage tanks will fill up quickly, a key factor that led to the production halt in October last year.
Reference: Bloomberg
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