Sanctions are working: The only plant in Russia producing equipment for LNG factories has stopped

Russia's only enterprise producing modules for factories producing liquefied natural gas (LNG) has stopped working due to sanctions.

The enterprise of the largest private Russian gas exporter Novatek in Belokamyanka, Murmansk Region, which was called the “LNG factory”, is likely closed, Bloomberg reports, citing satellite data collected by the Earth Observation Group (EOG) at the Payne Institute for Public Policy in Colorado.

Satellite images show that in late October and early November, the intensity of nighttime lighting at the plant was the lowest since 2018-2019, when this data first began to be collected.

“The average brightness of electric light at the facility fell by 75% compared to 2021-2023,” indicating a sharp decline in industrial activity in Bilokamenets, EOG experts say.

The site was supposed to become a unique center for the production of modular processing plants in Russia, capable of cooling natural gas to its liquid form. But after building two such plants for Novatek's latest liquefied gas project, Arctic LNG 2, the company has shown no signs of further capacity expansion in the near future.

Instead of building LNG plants from scratch in the harsh Arctic climate, Novatek decided to assemble them in milder conditions near the port of Murmansk. The shipyard in Belokamenets built the first two complexes for Arctic LNG 2, each consisting of 14 modules. The first of them was delivered by sea in July 2023, the second – already this year. Both complexes were successfully installed on Arctic LNG 2, with one producing liquefied gas until October this year, when Western sanctions complicated both the delivery and sale of cargo and almost stopped production at the facility. A third complex remains at the shipyard in Belokamenets, only partially built, satellite images show.

According to the Payne Institute, the Novatek shipyard's lighting intensity was highest from 2022 to 2023, coinciding with the period when the facility was building two lines for Arctic LNG 2. The further reduction in lighting at Bilokamenets indicates a halt in construction at the site and a retreat from Russia's goal of capturing 20% ​​of the global LNG market over the next decade.

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“The Bilokamenets construction center was also planned to be used for pre-assembly of modules for future Russian LNG projects,” said Laura Page, a natural gas and LNG analyst at research firm Kpler. The lack of activity at the facility points to a delay in the implementation of these projects, which were “considered critical to Russia's goal of exporting 100 million tons of LNG per year by 2030.”

What is known about Novatek's plant near Murmansk?

The project to create the Center for the Construction of Large-tonnage Offshore Structures (CSCMS) is being implemented in accordance with a decree of the Russian government from June 2015, according to the Novatek website, which calls the enterprise “a key facility for the LNG equipment manufacturing industry.” At the peak of construction, 19,000 workers were involved at the site, and more than 100 companies from 28 regions of Russia participated, according to the CSCMS website. According to the plan, Arctic LNG 2 was to produce 19.8 million tons of liquefied gas per year, with each of the three planned production lines expected to produce 6.6 million tons.However, these figures could not be achieved due to sanctions, and gas production from fields that were supposed to supply the plant fell by 90% in November compared to October, Bloomberg reported.

In November 2023, the US added Arctic LNG 2 to the sanctions list. A month later, Russia's Novatek notified buyers of force majeure regarding future supplies of liquefied gas. In June 2024, the US Treasury Department expanded the mechanism that provides for the imposition of secondary sanctions on persons from third countries who cooperate with sanctioned persons from Russia.

Shipments of LNG from the first line of the Arctic LNG-2 plant were planned to begin in December 2023 – early 2024. The launch of the second stage was expected during 2024, the third – in 2026.

The company launched the first of three lines of the new LNG plant only in December last year, but was forced to stop it due to a shortage of tankers.

In early September, it became known that record losses, Western technological sanctions and China's refusal to sign a new contract for Russian gas were disrupting the plans of Russian Gazprom to develop Arctic deposits.