The US is looking to curb Russia’s goal of becoming a significant provider in the global liquefied natural gas (LNG) market. The US State Department taking steps to include Russia’s Arctic LNG 2 energy project in its sanctions list confirms America’s intentions to hinder Russia’s LNG export ambitions and could lead to disturbances in global energy markets, as reported by the Financial Times.
Effective November 2, the US sanctions barred third countries in Asia and Europe from buying LNG produced by the Russian project, set to commence operations in 2024. The White House initially aimed to avoid disrupting energy flows to relieve pressure on allies in Europe already grappling with energy shortages following the cessation of Russian pipeline gas earlier this year. However, the latest ban will essentially prevent Western buyers from sourcing LNG from the Russian project, ultimately sending more disruptions across the global energy markets.
Energy Aspects, an energy and macro research consultancy, predicts that the sanctions, the first impacting LNG supplies, are likely to tighten the market. This tightening is projected to occur as a result of the ban on Russian LNG.
Columbia University’s School of International and Public Affairs gas specialist, Anne-Sophie Corbeau, shares the perspective that if the Arctic LNG 2 project does not come online as planned in 2024, it “will keep the markets a bit tighter for longer.” Additionally, LNG analytics head at Rystad Energy, Kaushal Ramesh, suggests that investors aligned with Western interests could potentially apply for exemptions with phase-down dates, akin to Japan’s authorization to import Russian oil from the Sakhalin 2 project above the price cap.
The Arctic LNG 2 project is managed by independent Russian LNG producer Novatek and is designed to include three LNG trains with a total annual production capacity of 19.8 million tons. The first train commenced in July, with the other two scheduled for 2024 and 2025.
In early November, US Assistant Secretary of State for Energy Resources Geoffrey Pyatt made public the US intent to “kill” Novatek’s flagship project. Kremlin Press Secretary Dmitry Peskov responded to this strong rhetoric, urging the international community to take notice of the US plan to dismantle the project.
The move by the US to impose sanctions on Russia’s LNG project is expected to have a significant impact on the global energy market, given the substantial role Russia has in LNG production. As Washington persists in its goal to limit Russia’s dominion as a major LNG supplier, the implications of this decision will continue to reverberate across the international energy landscape.
If the US continues to pursue this sanction, it is likely that the Arctic LNG 2 project will face severe obstacles, causing a ripple effect across the global energy markets, supply chains, and geopolitics. The effects of tightened sanctions on Russia’s LNG projects may prompt a reevaluation of energy sourcing, pricing, and trade relations among major economies. These developments underscore the interconnectivity and interdependence of the global energy architecture, with significant geopolitical and economic implications.
This potential disruption could also encourage technological and policy innovations aimed at diversifying energy sources and supply networks to mitigate future risks to the global energy system. Nevertheless, this episode serves as a reminder of the ongoing competition and collaboration within the highly charged and crucially important global energy landscape.