A Russian liquefied natural gas (LNG) facility has slashed its production by more than three quarters in one month, it has been reported, as sanctions from Vladimir Putin's invasion of Ukraine continue to wreak havoc on his key energy export.
The dramatic cut in output at the Arctic LNG 2 project signals that Russia is having problems in both exporting its key energy resource via pipelines controlled by state giant Gazprom and with its more flexible liquefied equivalent transported by ship.
The Arctic LNG 2 project in which Russia's biggest LNG producer Novatek has a 60 percent stake, is located in the Gydan peninsula and started production in December.
But Reuters reported on Tuesday that in May, the project recorded its lowest monthly production for the last six months, extracting around 55 million cubic meters (mcm) of natural gas—down from about 215 mcm in April.
Newsweek has contacted Novatek for comment.
The figure chimes with an April report in the Russian newspaper Vedomosti that production at the site had slumped to 83 mcm in February. This is five times less than the 425 mcm in December.
The project had planned to start delivering LNG in the first quarter of 2024 but foreign shareholders froze their participation in the project after it was hit with sanctions over Putin's invasion.
It has since faced problems securing specialist gas carriers to transport the gas while orders for specialist tankers were canceled due to sanctions.
In a report released in April, Paul Saunders, a senior adviser at the Virginia-based Energy Innovation Reform Project (EIRP) said sanctions had complicated Russia's efforts to get ice-capable LNG carriers from South Korea and Japan.
"Where the liquefaction technology is concerned, I think will they get that figured out and they've been working on building indigenous systems with some help," he told Newsweek in an interview in June.
However, "there's a huge constraint on its ice capable LNG carriers," he said, "I think that's going to be a big challenge for Russia.
"They could try to use other ports but then they need to develop their internal pipeline system to handle that and they don't really have that capability at this point."
It throws doubt onto whether Russia's LNG can offset the losses of markets for pipeline gas since the start of the war. Gazprom, once Russia's biggest earning company, posted its first loss in a quarter of a century in May and the following month announced its largest ever cut in natural gas production.
After the start of the war, Russia cut supplies to its lucrative market in Europe which responded by finding other suppliers. The Kremlin had hoped to increase sales to China via the Power of Siberia 2 pipeline but this project has stalled amid tough negotiating from Beijing.
Saunders said that Chinese negotiators might be able to leverage Russian pipeline deals with Gazprom against Russian LNG deals with Novatek or vice versa. "It's not obvious that China is going to need or want as much gas as Russia wants to sell."
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