Hanwha Ocean Faces $1 Billion Damages Claim Over Cancelled Contracts For Russia’s Arctic LNG 2

South Korean shipbuilder Hanwha Ocean is facing a claim of about $1 billion from Russia’s Arctic LNG 2 project over cancelled contracts to build LNG carriers.

Arctic LNG 2 has filed a claim with the Singapore International Arbitration Centre over a terminated shipbuilding contract, Hanwha Ocean said in a disclosure dated Sept. 3.

The claim is worth 1.37 trillion won, or about $1.02 billion.

The dispute involves three LNG carriers. Hanwha Ocean had agreed to build six Arc7 tankers, three for Russia’s Sovcomflot and three for Japan’s Mitsui O.S.K. Lines.

Hanwha Ocean, formerly known as Daewoo Shipbuilding & Marine Engineering, has previously said the three tankers ordered by Sovcomflot were cancelled because of sanctions on Russia.

Arctic LNG 2 Hit by US Sanctions

Arctic LNG 2 is led by Russia’s Novatek, which owns 60% of the project. The project was expected to become one of Russia’s biggest LNG plants, with a planned output of 19.8 million metric tons a year.

But U.S. sanctions over Russia’s actions in Ukraine have made it harder for the project to move ahead.

Novatek started production at Arctic LNG 2 in December 2023. The first cargoes reached customers in August 2024. All of those customers were in China.

The sanctions also affected plans to build LNG carriers for the project.

Three Tankers Cancelled

Hanwha Ocean had agreed to build six Arc7 LNG carriers for Arctic LNG 2.

Three were ordered by Russia’s Sovcomflot and three by Japan’s Mitsui O.S.K. Lines.

Hanwha Ocean has said the three Sovcomflot orders were cancelled because of sanctions against Russia.

The new claim from Arctic LNG 2 is linked to one of the shipbuilding contracts that was later ended.

$1.02 Billion Arbitration Claim

Hanwha Ocean said in its Sept. 3 filing that Arctic LNG 2 had taken the case to the Singapore International Arbitration Centre.

The company is seeking 1.37 trillion won, or about $1.02 billion. The exchange rate used was $1 for 1,341.9600 won.

References: Reuters, Upstream Online