As sanctions against Novatek projects become a certainty, the company has put two LNG projects on hold. However, the company will likely reprofile. This change is considered in the light of Russian North-West's development.
Novatek is seeking ways to reprofile its facilities. According to Kommersant, work on the Murmansk and Obsky LNG projects is currently halted. Novatek understands that all future projects will be subject to sanctions.
The Obsky LNG project was expected to operate alongside a gas chemical complex in Sabetta, but now the project's capacities will likely be oriented solely towards producing ammonia and urea (which are also easier to transport as bulk cargo). Russian fertilisers are not subject to sanctions, as they are considered vital for global food security.
A crucial change is that ammonia will likely be produced without carbon capture and storage (CCS) technologies, as this approach offers little benefit.
As Russian expert Alexander Sobko states, there is currently no incentive to develop blue ammonia because there is no advantage in achieving a low carbon footprint while producing under sanctions.
This shift may also be attributed to the recent decline in the overall popularity of hydrogen, both green and blue. There is a growing trend against hydrogen projects due to the high costs associated with their development and low demand.
In the public sphere, two large green hydrogen projects were cancelled in Australia and the US, with more smaller projects likely being quietly cancelled, while blue hydrogen projects were recently abandoned in Europe by Equinor and Shell.
As for the Murmansk LNG project, it represents a significant loss for the infrastructure of the Russian Arctic, as it could have become one of the key initiatives for the Kola Peninsula, offering numerous benefits for both the Murmansk Region and the Republic of Karelia:
The Murmansk LNG project will probably be put on hold in favour of reprofiling the Obsky LNG project. However, experts advocate for a similar reprofiling of Murmansk LNG due to its numerous benefits.
Vladimir Masloboev, an expert from the Project Office for Arctic Development, commented that it would be rational to address Murmansk LNG in a manner similar to that of the Obsky project; the only question is whether Novatek will have sufficient resources to focus on two projects simultaneously.
Another interesting development supporting joint LNG/fertiliser infrastructure on the Kola Peninsula could arise from advancements in the Russian North-West. This discussion has been ongoing since the Nord Stream 2 situation, given that there was a surplus of gas—~175 billion m³—that could be repurposed with great potential.
Boris Martsinkevich, an oil and gas specialist, highlighted in 2023 the potential to build a massive joint infrastructure project that could benefit the Russian North-West by creating thousands of jobs and connecting several initiatives:
This idea becomes even more intriguing in light of the ‘Big NSR’ initiative and a new federal law project regarding the formal extension of the Route announced on 15 October by the Head of Rosatom.
The current halt means that Novatek will primarily concentrate on completing the Arctic LNG 2 project while seeking ways to trade sanctioned liquefied natural gas. The second line of this project is being prepared for construction, with plans to build a third line by 2025 and launch it in 2028.
However, both projects still possess considerable potential and might serve as a unifying complex for the LNG infrastructure of the new ‘Big NSR’. It should also be noted that despite sanctions pressure, LNG and gas exports from Russia continue to increase.
Dmitry Tarasov
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