Sanctions Spur Russian Rethink of LNG Strategy

Sanctions and curtailed pipeline gas flows to Europe have forced Russia and its LNG export champion Novatek to reconsider LNG expansion priorities. Novatek’s announcement last week of a new large project, the 20.4 million ton per year Murmansk LNG, shifts the company's focus from Western Siberia's Arctic to northwestern Russia, a region with a more moderate climate and more infrastructure available. Sanctions are understood to have factored into the new project's location. In the Murmansk region, Novatek can buy electricity from the local Kola nuclear power plant for the proposed LNG plant. In the Yamal and Gydan peninsulas in the Arctic, it had been struggling to find alternatives to Western gas turbines for off-grid power generation at the Arctic LNG 2 plant, which is scheduled to launch its first train at the end of this year. The project did not receive all the turbines ordered from US-based Baker Hughes due to EU technology sanctions imposed last year after the outbreak of the Ukraine war. Murmansk ports also do not freeze, which makes costly ice-class Arc7 tankers unnecessary for Murmansk LNG. Construction of Arc7 tankers for Arctic LNG 2 faces serious delays also due to sanctions. Plant construction costs should also be lower than on Yamal and Gydan, because Novatek already assembles liquefaction trains in the Murmansk region.