Russia has been forced to shut down part of the world’s biggest liquefied natural gas plant, near the Arctic city of Murmansk, after demand was wrecked by Western sanctions.
The Belokamenka yard, completed last year and designed to employ 15,000 workers, is deserted, with most contractors having quit the site.
The shutdown is a significant blow to Vladimir Putin, the Russian president, who last year toured the site with Leonid Mikhelson, head of Novatek, Russia’s second largest gas company, which built it.
Novatek produced 79bn cubic metres of gas last year, roughly equivalent to the UK’s entire consumption.
Back then the two men boasted that Belokamenka was a world-leading industrial site.
However a few months later the US Treasury imposed sanctions on the Arctic LNG 2 project. The European Union took similar action.
The LNG 2 project has seen an exodus of contractors in the wake of work at the site drying up – Natalia KOLESNIKOVA / AFP
The Arctic LNG 2 is a liquefied natural gas (LNG) plant in Russia’s western Siberia designed to export gas from the Salmanovskoye and Geofizicheskoye fields.
The Belokamenka yard was built to construct massive offshore platforms needed to process gas for Arctic LNG 2. From there it would have been exported to Asia via the Arctic sea routes around the north of Russia in ice-breaking tankers.
Two of three planned platforms have already been built and towed to the Gulf of Ob, where the gas fields lie. They were meant to produce 20m tonnes of gas but neither is in production and the third seems unlikely to ever get built – meaning Belokamenka has become redundant.
The sanctions also contributed to a shortage of ships. Novatek needed a fleet of would ice-breaking LNG carriers for the project to work, but few shipyards were willing to risk becoming sanction busters.
A shortage of ice-breaking LNG tankers is further restricting Russia’s export capabilities – Olesya Astakhova/Reuters
It left Novatek dependent on the Zvezda Yard in Vladivostok for its ships – but the facility struggled to build such advanced vessels.
The latest reports come via the Barents Observer, a media outlet in Kirkenes, northern Norway, close to the Russian border and to the Murmansk region.
Separate reports from a Murmansk media outlet, the Arctic Observer, confirm the shut down. It reports that the main contractors and subcontractors have left the region.
Construction company Vellestroy reportedly abandoned Belokamenka in September, with contractors Renkons Arktik now also leaving.
There are reportedly only 500 people remaining on the site – mostly security guards.
A research commentary on the Arctic LNG 2 project by Vitaly Yermakov, of the Oxford Institute of Energy Studies, said the sanctions against Russia’s LNG projects had proven unusually successful.
Ashley Kelty, an oil and gas analyst with Panmure Gordon investment bank, said the shutdowns would have little effect on LNG supplies to the EU and UK as they came mostly from Qatar and the US.
He said: “There was a Russian desire to export LNG to Asia as the gas exports to Europe hinged around pipelines like NordStream2 rather than LNG.
“I don’t think this will have any impact on European supplies as all the near term growth in LNG volumes is coming from the US. I would expect that Trump will lift the restrictions on new LNG export projects and that even more US capacity will come on towards the end of decade.”
A spokesman for the Russian Embassy in London said they were unable to offer comment.
The Russian energy ministry and Novatek did not respond to requests for comment.
Novatek is one of many companies and individuals subject to US sanctions for supporting Russia’s war effort. The Arctic LNG 2 project and its shipment of LNG have been particularly targeted.
One of the biggest blows to Putin’s Arctic expansion plans came in September when India announced it would not buy LNG from Arctic LNG 2.
Pankaj Jain, the Indian oil secretary, told Reuters: “We will not buy [supply from] Arctic LNG 2. We are not buying any sanctioned commodity. Something which has broad-based sanctions, we are not touching it.”
However, India has none the less continued to accept some supply from Moscow. Russia’s state oil firm Rosneft on Thursday agreed to supply nearly 500,000 barrels per day of crude to Indian private refiner Reliance in the biggest ever energy deal between the two countries.
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