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Russia is once again attempting to revive its liquefied natural gas (LNG) exports from the Arctic LNG 2 project, several months after Western sanctions forced a slowdown in operations. Recent 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.
This facility, located in northern Russia, is a crucial part of Moscow's strategy to triple its LNG exports by 2030. However, it has remained largely inactive due to the challenge of finding global buyers willing to defy U.S.-led sanctions.
The recently docked ship, named Iris, is an Arc4-class vessel. Its reinforced hull is designed to navigate through the icy Arctic waters, allowing it to take the shorter northern sea route to Asia during the summer months when ice levels are lower.
With reduced gas pipeline supplies to Europe since the onset of the Ukraine conflict in 2022, Russia is eager to boost its LNG exports to make up for lost revenue. Shipping gas has now become a key revenue stream for the country.
To support Arctic LNG 2, Russia has quietly established a shadow fleet of at least 13 vessels, many of which are capable of operating in icy conditions. Some of these ships have changed management several times, possibly to obscure their true ownership.
Bloomberg's monitoring data indicates that the current fleet includes four ice-class LNG tankers—one docked at the Arctic LNG 2 terminal and three idling in the Barents Sea—along with three conventional LNG tankers also positioned in the Barents Sea. Additionally, LNG vessels are undergoing maintenance in China, with another one on its way. One tanker is near floating storage in Russia's Far East, while two others are currently idle in the Gulf of Finland, previously utilized for the sanctioned Portovaya gas project.
Experts suggest that this fleet provides Russia with the capacity to transport gas, but only if buyers are willing to take the shipments. Malte Humpert from the Washington-based Arctic Institute mentioned in an email that Russia now has more vessels available than it did last year, enough to transport gas if buyers can be found.
Between August and October 2024, eight LNG shipments departed from Arctic LNG 2, but none reached foreign ports. Instead, the gas was transferred to two storage units—one in the Barents Sea and the other in Russia's Far East. Large-scale production halted in October after ice blocked the area, making it too difficult for standard tankers to operate.
According to Igor Tonkovidov, CEO of Sovcomflot, Russia's first domestically built ice-class LNG tanker may be ready by the second half of this year. He informed Interfax that the vessel is currently undergoing sea trials.
Increasing gas sales could help lower global prices and relieve pressure on Russia's gas storage. However, buyers may still be hesitant due to the risks associated with violating sanctions. Traders familiar with the situation noted that Russian officials linked to Arctic LNG 2 have been in talks with countries like India and China over the past year to secure customers, though it's unclear if any agreements have been finalized.
Jan-Eric Fahnrich, an analyst at Rystad Energy, pointed out that the biggest challenges remain finding buyers and ensuring sufficient shipping capacity. He added that Novatek, the majority shareholder of Arctic LNG 2, is likely to offer discounted prices and target customers in Asia. China is viewed as a potential buyer, but demand there has been declining for the past eight months.
Malte Humpert highlighted that over one million cubic meters of LNG loaded last year still remain unsold, currently stored in floating storage. Satellite images from June 25 show production units at the Arctic LNG 2 site flaring gas, indicating that these units may either be operational or cooling down. Without regular exports, storage tanks will fill up quickly, which was a key factor that led to the production halt in October last year.
Reference: Bloomberg
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