(Bloomberg) -- Russia’s sanctioned Arctic LNG 2 plant has stopped liquefying natural gas as western bans are restricting its options to ship and sell cargoes, according to people familiar with the situation.
Commercial liquefaction at the facility was halted due to high inventories as the plant cannot freely export cargoes, said the people, asking not to be named discussing information that isn’t public.
The facility located near the Arctic Circle has become a target of several waves of western sanctions in the past year. The restrictions imposed by the US and its allies over the Kremlin’s invasion in Ukraine restricted Arctic LNG 2’s access to ice-class tankers built for the project in South Korea and made foreign buyers reluctant purchase the cargoes.
As a result of the halt, the average daily output at the gas field feeding the Arctic plant dropped to around 5.3 million cubic meters so far this month, another person said. That’s less than half of the daily production for most of September, which averaged 12.1 million cubic meters, the person said.
Some gas processing is needed to maintain LNG facilities even when they don’t operate at commercial scale. Arctic LNG 2 pumped and processed some small volumes of gas earlier this year even before it started cargo loadings.
Arctic LNG 2 and its largest shareholder, Russia-based gas producer Novatek PJSC, didn’t respond to Bloomberg requests for comment.
While the facility managed to start shipments of its super-chilled fuel in August by deploying conventional gas carriers, often with opaque ownership, and so far has sent eight cargoes to the market, none of the batches has been able to find a buyer.
Geoffrey Pyatt, assistant secretary for energy resources at the US State Department, said earlier this month that the White House will continue to ‘tighten the screws’ on Russian LNG in a move to reduce export revenues the Kremlin may use to fund the war in Ukraine.
READ: Russia’s Struggle to Sell LNG Is a Win for the US
From mid-October, Russia banned conventional vessels from journeys across its eastern Arctic waters towards Asia due to harsher than expected ice conditions. The restriction have further limited shipment options for Arctic LNG 2 until the sea passage reopens for non-ice-class ships next summer.
Arctic LNG 2 has an annual design capacity of 19.8 million tons, yet so far only one train, able to produce 6.6 million tons per year, is operational. The facility has been ramping up its natural gas production and liquefaction in summer and in August, with the start of exports, the volumes reached the highest so far this year.
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