Yamal LNG Continues to Operate Despite Sanctions and Risks

Despite facing sanctions and risks, Yamal LNG has managed to continue its operations. The project's resilience is a testament to its strategic importance and the efforts of its stakeholders.

Located on the Yamal Peninsula in northwest Siberia, Yamal LNG is one of the world's largest liquefied natural gas (LNG) projects. The project's remote location has presented significant logistical challenges, but its developers have found ways to overcome them.

Yamal LNG is a 19.8 million tons per annum (MTPA) project, with an estimated investment of over $27 billion. The project's scale and complexity are a reflection of Russia's ambitions in the global energy market.

The Yamal LNG project required a massive logistical effort to transport equipment and personnel to the remote location on the Yamal Peninsula.

The project's construction site was accessible only by air or sea, with the nearest airport being over 500 kilometers away.

A fleet of 17 ice-class vessels was used to transport equipment and supplies to the site.

The harsh Arctic environment presented significant challenges, with temperatures often dropping below -50°C.

To mitigate these challenges, the project team implemented a range of measures, including the use of specialized equipment and emergency response plans.

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Icebreaker LNG carriers are designed to operate year-round from the Yamal peninsula and can break ice up to 2.1 meters thick.

These specialized tankers are leased by Yamal LNG from four companies: Sovcomflot, MOL, Dynagas, and Teekay.

The tankers were designed in Finland by Aker Arctic Technology Inc. and built at the Daewoo Shipbuilding & Marine Engineering (DSME) shipyard in South Korea.

The Christophe de Margerie, one of these icebreaker tankers, made history by traversing from Norway to South Korea across the Northern Sea Route in just 19 days in August 2017.

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Russia has shifted the transfer of LNG into its own waters near Murmansk due to sanctions.

Deliveries at Zeebrugge are down by 16, while transfers at Kildin near Murmansk are up by 12.

Novatek, the operator of Yamal LNG, has gained substantial experience in running ship-to-ship transfers at sea reliably and effectively over the past 8 years.

Between 2018-2020, Novatek ran transfers in Norwegian waters before shifting to Kildin in 2021.

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The United States imposed sanctions on several companies, including Cosco Shipping Tanker (Dalian) and its subsidiary Cosco Shipping Tanker Dalian, in September 2019 due to their involvement in supporting LNG shipments from Sabetta.

These sanctions affected several ARC7 LNG tankers, including Eduard Toll, Rudolf Samoilovich, Nikolay Evgenov, Vladimir Voronin, Georgy Ushakov, and Yakov Gakkel, which were operating out of Sabetta.

The EU has also introduced sanctions targeting Russia's Yamal LNG project, including a ban on transhipping Russian LNG by March 2025.

This ban will prevent Russian LNG from being transferred from ice-capable carriers like Christophe de Margerie to conventional tankers at EU terminals.

The EU has added 52 new vessels to its sanctions list, including four LNG carriers connected to Russia's Arctic LNG 2 project: North Air, North Mountain, North Sky, and North Way.

These ships are owned by UAE-based companies and operated by firms in Singapore, and were previously sanctioned by the U.S. for their involvement in Russia's shadow fleet activities.

The EU's sanctions are not limited to ships alone, also including new restrictions on Russian defence companies and individuals involved in Russia's energy sector.

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Novatek has managed to maintain its delivery pace despite the switch to Kildin from Zeebrugge, shipping out 120 cargoes aboard 14 Arc7 LNG carriers in the first five months of 2024.

The transfer at sea requires more careful schedule planning, but Novatek has optimized its logistics to minimize delays. This is evident in the fact that it has managed to conduct two ship-to-ship transfers simultaneously involving four LNG carriers.

Activity at Kildin has doubled from 12 to 24 ship-to-ship transfers, with most of these transfers being reloaded from vessels originally destined for Europe. This shift has significantly increased the volume of cargo being handled at Kildin.

Trips to Kildin only add minimally to the distance or length of the journeys, making it an efficient alternative to Zeebrugge.

The United States imposed sanctions under executive order 13846 against several companies in September 2019, following an attack by Iran on Saudi Arabian oil fields.

The sanctions targeted Cosco Shipping Tanker (Dalian) Seaman and Ship Management Company Ltd and the Cosco Shipping Tanker Dalian company, which are subsidiaries of the Cosco Shipping Company.

The Joint Venture TC LNG between the Cosco Shipping Tanker Dalian company and the Canadian firm Teekay was also affected, with the China LNG Shipping Ltd (CLNG) holding a 50% stake.

The CLNG has more than one third of Sabetta's LNG ice fleet, with six ARC7 LNG tankers operating out of Sabetta.

These tankers include Eduard Toll, Rudolf Samoilovich, Nikolay Evgenov, Vladimir Voronin, Georgy Ushakov, and Yakov Gakkel.

However, it's worth noting that not all ARC7 tankers were directly sanctioned, but US Office of Foreign Assets Control (OFAC) rules require caution to be exercised in these cases.

The Cosco Shipping Tanker (Dalian) company and its TC LNG were later lifted from sanctions on January 30, 2020.

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Novatek's business model is heavily reliant on exporting liquefied natural gas (LNG) to the European market.

Voyages from Yamal LNG to European ports take only between 8-10 days year-round, making it a cost-effective option for Novatek.

In contrast, deliveries to China during winter take 50 days, making it a less appealing option for the company.

The proximity of the European market is fundamental to Novatek's business model, which could be challenged by a full EU ban on the import of Russian LNG.

A ban would affect Novatek's operations, especially during the winter season when the Northern Sea Route shortcut to Asia is frozen over.

The recent transshipment ban has done little to affect Russian LNG exports from Yamal LNG.

This suggests that Novatek's operations are still viable despite some restrictions, but a full ban could have significant consequences for the company.

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Yamal LNG is a world-first LNG plant built above the Arctic Circle. It's a massive project that consists of an airport, a port, a gas treatment unit, four storage tanks, and a power plant.

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The Yamal LNG plant is situated on 180 hectares, which is roughly the size of 250 soccer fields. This gives you an idea of its enormous scale.

The plant will eventually have a capacity of 16.5 million tons of liquefied gas a year, making it a significant player in the global energy market.

Temperatures during the first winter dropped to -50°, and with the wind chill factor, it felt like -67°. The extreme conditions required the team to be extremely vigilant about safety rules and personnel.

The team had to get creative to build the plant in such an extreme environment, winterizing a tank by covering it and maintaining a temperature above zero inside.

The challenge of building on permafrost was being able to install equipment on unstable ground, sand. To solve this, the team designed special foundations made of piles and prefabricated concrete covers placed over piles sunk into the permafrost.

The plant couldn't be built on site, so the team took a modular approach, shipping modules from China to the port of Sabetta on a multi-wheeled self-propelled transporter.