Sanctions-hit Arctic LNG 2 Demands $1B From South Korean Shipbuilder

Arctic LNG 2, a liquefied natural gas project led by Russia’s Novatek, is seeking about $1 billion in damages from South Korean shipbuilder Hanwha Ocean over cancelled tanker construction contracts, according to a disclosure by Hanwha.

Arctic LNG 2, which is 60 per cent owned by Novatek, was expected to become one of Russia’s largest LNG plants, with planned output of 19.8 million tonnes a year. But US sanctions imposed over Russia’s actions in Ukraine have complicated its prospects.

Novatek began production at Arctic LNG in December 2023, but cargo deliveries to end-users, all in China, did not begin until August 2024.

Hanwha Ocean, formerly Daewoo Shipbuilding and Marine Engineering, had agreed to build six Arc7 tankers for the project, including three for Russia’s Sovcomflot and three for Japan’s Mitsui OSK Lines.

However, Hanwha has previously said the three tankers ordered by Sovcomflot were cancelled because of the sanctions on Russia.

In a disclosure dated September 3, Hanwha said Arctic LNG 2 had filed a claim with the Singapore International Arbitration Centre related to a shipbuilding contract that had been terminated.

The claim totals KRW1.37 trillion, equivalent to about $1.02 billion.

Novatek did not immediately reply to a request for comment.