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Novatek issues force majeure clause to Arctic LNG 2 buyers
Russian natural gas provider Novatek has issued force majeure notices to some customers contracted to lift LNG from its Arctic LNG 2 project, according to shipbroker Poten
Novatek is Russia’s second-largest natural gas producer behind Gazprom and its highly anticipated Arctic LNG 2 project, a 19.8M tonne per annum (mta) behemoth, was due to start operations December 2023.
The notifications were issued after the United States imposed sanctions on the Arctic LNG 2 project late last year, which looks set to jeopardise the international partners’ participation in the project.
Novatek received a forece majeure notice from the three-train Arctic LNG 2 project in late November, which said the facility was unable to fulfil its production and delivery obligations due to the sanctions which have also led to a shortage of LNG vessels for loadings.
Novatek has a 60% operating stake in Arctic LNG 2, which will give it access to 11.88 mta of supply across three trains. The company has since passed on the force majeure notice to term buyers whose contracts specified offtake from Arctic LNG 2. Major firms Shell, Vitol, Repsol, Gunvor and China’s ENN, Zheijang Energy and Shenergy all have sale and purchase agreements with Novatek.
It also has a strip deal with Japan’s JERA Global Markets for six Arctic LNG 2 cargoes, with deliveries to start in 2024.
Reuters reported that Repsol said it did not have a firm gas supply contract and the company had not received any force majeure notification.
Novatek also operates the Siberia-based Yamal LNG plant which sends cargoes mainly to Europe which is a facility that has so far not faced United States sanctions.
Arctic LNG 2 is a key effort to increase Russia’s LNG supply market share to a fifth by 2030 (up from 8% today). The first LNG tankers from the project were expected to set sail in Q1 this year.
And Russia’s Deputy Prime Minister Alexander Novak reportedly confirmed, in an interview with the state-run Rossiya 24 TV channel, that the first train of the Arctic LNG 2 project has started operating and first shipments are due in Q1 2024.
Other stakeholders in the project include French major TotalEnergies, China’s CNOOC and PetroChina, and a Japanese joint venture comprised of Mitsui and Jogmec. TotalEnergies is expected by some to be ready to exit its Russian LNG businesses. The Chinese and Japanese stakeholders, meanwhile, were heard to have commenced the long process of applying for sanctions waivers from the US Office of Foreign Assets Control.
China has continued to support the project. Two heavy-lift vessels, Audax and Pugnax, departed from Penglai, China on 6 January and will arrive in Murmansk, Russia.
Poten believes the Chinese and Japanese stakeholders are applying for sanctions waivers from the US Office of Foreign Assets Control while Total may exit the business altogether.
All three trains of Arctic LNG 2 are expected to come online by 2026.
A direct blacklist of the entire Arctic LNG 2 project is the latest in a string of US sanctions targeting the facility. The US had earlier sanctioned two floating storage units (FSUs) that were to be deployed at Kamchatka and Murmansk to facilitate and optimise Arctic LNG 2 deliveries. The operator of the two FSUs, Arctic Transshipment, and a host of other companies providing engineering, technology and/or construction services to the project were also sanctioned.
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