Image Credit: “Arctic LNG-2 advances with tank FEED job/TradeWinds,” available at Yahoo Images (11/01/2024).
TOKYO, Oct 31 (Reuters) – Japan’s Mitsui O.S.K. Lines (MOL) may be unable to deliver tankers for Russia’s sanctions-hit Arctic LNG 2 project, it said on Thursday, in a blow to the plant that only began producing late last year and halted operations this month.
Tougher Western sanctions on Russia mean MOL needs to modify the charter contracts, it said on Thursday and has already started the related talks.
Between 2020 and early 2022, MOL signed charter deals for three ice-breaking liquefied natural gas (LNG) vessels and a condensate ice-breaker for the Arctic LNG 2 project. The U.S. placed the plant under sanctions after Russia invaded Ukraine in February 2022, part of wider measures on Moscow.
“Should the negotiation encounter difficulties, we may be unable to perform these charter agreements. If the charter agreements are discontinued, we will seek to sell the vessels to third parties,” MOL’s statement said.
In all, it said it had invested 105 billion yen ($689 million) in the vessels and, given the possible difficulties in using the ice-breakers for other businesses, it may face losses if it cannot sell them at a high enough price.
The three ice-breaking LNG carriers for the Arctic LNG 2 project were set for operation last year, and the condensate carrier was to be delivered in 2024 to ship LNG and condensate via the northern route in the Arctic to Europe and Asia.
Separately, the Russian daily Kommersant reported this week that Russia’s Zvezda shipyard has again delayed the delivery of two ice-class Arc7 gas carriers for the Arctic LNG 2 project to 2025 from the initial 2023.
A person familiar with the matter told Reuters this month that the Arctic LNG 2 shut down commercial operations at its first and only operational train, with no plans to restart during winter.
Russia’s Novatek is leading the project with a 60% stake. Other shareholders are France’s TotalEnergies, China’s CNPC and CNOOC, as well as Japan’s Mitsui and the state agency JOGMEC.
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