On Sunday, the Financial Times issued a report noting that the inclusion of the Russian Arctic LNG 2 energy project in the latest sanctions list from the US State Department is confirmation that the United States is willing to cause major disruptions to global energy markets, in an effort to prevent Russia from becoming a major exporter of liquified natural gas (LNG).
On November 2nd, the United States introduced the new sanctions on the Russian gas project, which sits in the Gyda Peninsula. The new restrictions will ban third party nations in Asia and Europe from buying LNG the project produces when it begins operations in 2024.
Washington has sought to not disrupt the energy markets too much with its sanctions on Russia, due to the pressures which its allies in Europe are already experiencing as a result of shortages in the supply of natural gas from Russia. Following the Russian invasion of Ukraine natural gas flows were reduced and then halted permanently by sabotage bombings of the Nord Stream 1 pipeline.
However analysts say these latest sanctions would essentially prevent Western buyers from purchasing any LNG supplies from the new Russian project, which would only further disrupt global energy markets.
Energy Aspects, an energy and macro research consultancy predicted that the sanctions, which are the first sanctions which will target supplies of LNG, can be expected to tighten the global market for LNG.
Meanwhile, Anne-Sophie Corbeau, a gas specialist at Columbia University’s School of International and Public Affairs, said to FT that unless the Arctic LNG 2 project is able to begin operating in 2024 as has been planned, it “will keep the markets a bit tighter for longer.”
Kaushal Ramesh, the head of LNG analytics at Rystad Energy, says the investors aligned with the West, “could possibly apply for exemptions with phase down dates,” similarly to how Japan was authorized to purchase oil supplies from the Sakhalin 2 oil and gas project at prices exceeding the price cap.
The Arctic LNG 2 project is operated by Russian LNG production company Novatek. The project will have a yearly production capacity of 19.8 million tons which will be supplied by three LNG trains. In July, the first of the three trains was launched, while the second and third are scheduled for 2024 and 2025.
Geoffrey Pyatt, the US assistant secretary of state for energy resources, said earlier this week that the United States is looking to “kill” Novatek’s premier project. In discussing the aggressive tone coming out of Washington DC, Dmitry Peskov called on the world community to monitor the US plans to destroy the project.
