Eikland Energy assessed the outlook for Arctic 2 LNG plant (ALNG2) at Utrenniy, Siberia on 5 December 2023 following the imposition of direct sanctions on the project by the US Office of Foreign Asset Control (OFAC). The note recommended that Novatek mothball ALNG2 until the political conditions that formed the basis for the sanctions would be resolved. So what is the status now?
Not surprisingly, Novatek did not take the advice. Novatek installed the incomplete second train but failed to sell the 10 cargoes loaded from the first train between August and October 2024. With no LNG buyer and two full Floating Storage Units (FSUs Saam and Koryak) and two full ships, Novatek did in fact mothball ALNG2 train 1 from the middle of October 2024 to March 2025. Meanwhile the firm attempted to complete train 2 with the delivery of China-built power generator sets.
Success?
Novatek’s apparent ALNG2 sales breakthrough came on Friday, 29 August 2025 with the (presumed) heavily discounted LNG cargo discharge of the Arctic Mulan at the pier 1 of the Binhai Guangxi regas terminal. This was preceeded by four months of unprecedented trade conflict and continuing tension between the US and China. China has likely at a high level decided to accept sanction risk for the government-owned national gas transmission system operator PipeChina, who also operates the Binhai LNG terminal.
While another 1 mill. ton of already produced ALNG2 LNG could possibly reach China on several other ships in the weeks ahead (with Voskhod and Zarya at the lead, indicatively to Yuedong), the financial bottom line for Novatek’s ALNG2 remains deeply negative. In addition to having two incomplete trains (and an abandoned train 3), ALNG2 daily operating conditions are arguably more severe than for any other LNG plant in the world. Recent ship loading rates indicate an effective capacity of only about 3 mtpa, far less than the design capacity of 13.2 mtpa for the two trains.
Difficulties caused by the NSR
The Siberian Northern Sailing Route (NSR) nominally gives Novatek an annual operating window from the middle of August to December 1, just over 3 months. Even in this “summer period” ice conditions can be unpredictable and several ALNG2 ships have recently been challenged in the East Siberian Sea. In December 2023, ship convoys were stuck in pack ice for two weeks and had to be rescued by expensive nuclear ice-breaker assistance. Several 2.1 meter ice-rated Arc7 ships serving Yamal LNG have experienced ice-related damages. Novatek now appears intent on avoiding further problems for either Yamal or ALNG2 ships.
Complicating the situation for ALNG2, eight planned Arc7s are unavailable due to sanctions, of which three are completed and anchored in Korea, and five awaiting completion at the Zvezda shipyard near Vladivostok, Russia. For ALNG2, the lone Arc7 Christophe de Margerie (originally serving Yamal, now sanctioned) recently led the way east through the NSR ahead of several Arc4s that struggled through patchy drift ice at a prudent 5 knots.
The ice-unrated Arctic Metagaz has now been waiting for several days in front of ice west of Wrangel Island (ref. image), not daring to proceed. Facing the same uncertainty the similarly ice-unrated La Perouse, the last ship available to be loaded, is now considering its options at the mouth of the Ob Bay after loading at ALNG2.
Not an easy plant to run
NSR refreezing will start again at the end of October. While sanction-breaking LNG sales may now be pushed through with ships on the way, logistically the Christophe de Margerie and the four Arc4-rated ships likely must return west. This would be either to ALNG2 at Utrenniy or to pick up “old” 2024 LNG from the Saam FSU anchored in the Ura Guba west of Murmansk. If they wait too long, NSR freeze-up could force ships to have to return via Africa.
ALNG2 LNG production and ship scheduling must be a nightmare for Novatek. Incomplete gas turbine and power generating equipment for both trains, due to sanctions, has significantly reduced capacity and complicated operations. It should also be noted that because of these factors ALNG2 is, by Eikland Energy estimates, clearly the most polluting LNG plant in the world, with more natural gas flared than converted to LNG.
Commercially it is hard to see a rationale for current ALNG2 LNG sales beyond simply getting rid of “aged”, lower-value LNG (such as by the Arctic Mulan) and to help commissioning of the two ALNG2 trains. For China, total deliveries from ALNG2 this year will not be critical and probably only represent 1% of LNG demand.
Limited market impact
In the weeks ahead there will of course be a lot of ALNG2 ship fleet tracking and writing about where Voskhod, Zarya, Iris, Buran, Arctic Vostok, Christophe de Margerie and five other ships will seek to deliver cargoes. As with the Arctic Mulan cargo to Beihai, Eikland Energy believe PipeChina will continue to be the primary sanction violator.
Only Arc7 ships will be able to serve ALNG2 with NSR and Ob Bay freeze-up from Desember. If sanctions are lifted, or continued challenged with impunity, the 3x longer route around Africa to China will be a sailing alternative until August 2026. However, with one or possibly two Arc7s in shuttle traffic between ALNG2 and the Saam FSU at Ura Guba (assuming availability of the new Aleksey Kosygin), ALNG2 capacity will likely be curtailed to perhaps only 1.5 mtpa. That is only 0.3% of world LNG supply; the same as a single block at Venture Global’s Plaquemines!
Under current geopolitical circumstances, the operational and financial realities of the ALNG2 project make its viability questionable even on a cash basis. China’s political support cannot hide that NSR constraints and other sanctions on equipment and services seriously undermine ALNG2’s economic proposition.
Winter hiatus
From a political and strategic perspective, Russia’s most logical path for ALNG2 and natural gas at large would be to find a way to re-engage with Europe as a partner. This will solve virtually all of the project’s logistical problems. As Putin’s resolve on Ukraine stands, however, that scenario appears to have limited near-term prospects. But politics can change quickly and a cause for a pause for thought is that on 13 January 2026 Russia’s war on Ukraine will have lasted as long as its war with Germany during WW2, 1417 days.
With projects such as Plaquemines, LNG Canada, Costa Azul and Golden Pass entering service in the months ahead, ALNG2 becomes a minor factor. The small ALNG2 project and its fleet will be a very minor part of this picture until a breakthrough is achieved and sanctions are lifted. By December Arctic 2 LNG is likely to go into a winter hiatus anyway.
Concluding note in the perspective of GasTech 2025 in Milano this week:
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