Arctic LNG-2 shutdown: what is happening now with Russia's grandiose gas project

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to the Novye Izvestia newspaper on the shutdown of LNG production at the Arctic LNG 2 project.

It is necessary to distinguish between the legal side of the case and the actual situation, Alexey Gromov reminds:

— Blocking sanctions were imposed not against Novatek, but specifically against the Arctic LNG 2 project, therefore, in the public field, Novatek will in every possible way deny that it helps in the implementation of this project. Legally, it should not and will not make any public statements to the effect that, yes, we are optimizing logistics in such a way as to provide Yamal LNG now and Arctic LNG in the future. But we are now discussing not the legal, but the factual side of the issue. And here we must understand that Novatek has opportunities for the joint use of gas carriers.

Novatek is forced to reduce shipments from Arctic LNG 2 in favor of fulfilling contractual obligations for Yamal LNG, Gromov says:

— The shortage of ships is the main problem in the maintenance of this project. First, natural gas production at the Utrennoye field, which serves this project, was halved. And now this has resulted in a reduction in exports and its complete shutdown. When this project is launched again, I do not rule out that maybe in the coming months it will not work until the problem with a sufficient number of vessels for its operation is solved. It can happen.

If you put Arctic LNG 2 out of brackets, Novatek is doing quite well, Alexey Gromov believes. The bulk of LNG to Europe comes from the Yamal LNG plant, and now prices there have risen and exceeded $ 400 per thousand cubic meters. The company also sells gas inside Russia and successfully provides Gazprom with solutions to gasification problems. Oil also brings money to the company.

— I am not at all sure that the suspension of the Arctic LNG 2 project in the current conditions will somehow affect the company's economy as a whole. But if force majeure is maintained for the Arctic LNG 2 project, because in this situation the company is not obliged to pay off creditors, it is even beneficial for Novatek to maintain the status quo with force majeure until a sustainable economic solution is found for Arctic LNG 2," the analyst notes.