Russia’s largest liquefied natural gas (LNG) manufacturer has reportedly suspended production due to the effect of sanctions, as Vladimir Putin’s war in Ukraine continues to negatively impact his country’s energy industry.
Reuters Novatek had halted operations at its Arctic LNG 2 project, which processes fuel from the Utrenneye box on the Gydan Peninsula in western Siberia, in the latest blow to Russian fuel exports.
Newsweek reached out to Novatek for comment via email.
This comes as Russian investments in exports and Putin’s war have been hampered by repeated drone attacks on oil facilities, blamed on Ukraine. An energy expert told Newsweek that state-owned oil giant Rosneft cut its oil production by a fifth in March.
Novatek is looking to breathe life into its LNG exports after Russia lost its main pipeline fuel exports to Europe due to sanctions imposed following the invasion of Ukraine.
The plan to start announcing LNG deliveries in the first quarter of this year, however, foreign shareholders halted their stake after the company was subjected to Western sanctions, Reuters said.
One train, a production unit used to convert vegetable fuel into LNG, will remain closed until at least the end of June, a source told Reuters. The other two trains will be delivered by sea from the Arctic port of Murmansk.
However, the sanctions have led to a lack of specialized tankers to transport LNG from Russia through the thick sea ice. Six Arc7 tankers were to be built through Hanwha Ocean: 3 for Russia’s largest oil organization, Sovcomflot, and 3 for Japan’s Mitsui O. S. K. Lines.
But the three tankers ordered through Sovcomflot were cancelled after U. S. approval in February.
Russian newspaper Vedomosti quoted Russian Energy Ministry officials as saying that production from the allocation had fallen to 83 million cubic meters in February due to a delay in LNG shipments.
Russia is the world’s fourth-largest producer of LNG, with annual exports of 32. 6 million tonnes. The suspension of Novatek’s allocation would undermine the country’s goal of capturing one-fifth of the LNG market by 2035.
It’s the latest blow to Russian energy exports, which are key to financing the war effort in Ukraine and Putin’s social spending plans for the next six years.
In recent months, oil facilities in a giant region of Russia have been attacked across Ukraine, including Ryazan and Pervyy Zavod south of Moscow, in the Rostov region near the Ukrainian border, and in Nizhny Novgorod and Kirishi near St. Petersburg. .
The targets were the main technological facilities that convert raw materials into exportable quality petroleum products. Bloomberg said the affected refineries accounted for 12 of Russia’s oil refining capacity.
Mykhailo Gonchar, group chairman of CGS Strategy XXI, said the research shows that the average oil refining capacity of Russia’s largest oil company, Rosneft, has decreased by 19% compared to January.
“Rosneft’s gigantic export-oriented refinery in Tuapse (in the Krasnodar region) has been bankrupt for more than two months,” he told Newsweek. “So those losses are significant, but still fatal. “
Gonchar, who is also editor-in-chief of Black Sea Security magazine, said the effect of military action depends on the extent of the damage caused and whether the recycling process is suspended during repairs.
“Somewhere it’s done faster, if the pain is less, the repair can take several weeks,” he said. “In the case of more serious damage, repair can take several months. “
“This also depends to a large extent on how temporarily the Russians will be able to buy Western-made or Chinese analogues, equipped with technological capabilities. “
So far, the measures have caused casualties and fixed costs, while hampering Putin’s war machine, but “for those measures to have a deadly effect, they will have to continue unabated,” he added.
Brendan Cole is a senior journalist at Newsweek in London, UK. It focuses on Russia and Ukraine, specifically on the war unleashed through Moscow. It also covers other areas of geopolitics, adding China.
Brendan joined Newsweek in 2018 from the International Business Times and, in addition to English, is fluent in Russian and French.
You can contact Brendan by emailing b. cole@newsweek. com or following him on his X @brendanmarkcole account.