Japan's Mitsui signs SPAs for Russian Arctic LNG 2 equity liftings

Japan's Mitsui has signed sales and purchase agreements with customers for its equity lifting volumes from the Arctic LNG 2 project in northern Russia ahead of the first train starting up later this year, a company spokesperson told S&P Global Commodity Insights Aug. 1.

"We are working toward starting production from the first train [of the Arctic LNG 2 project] in 2023," said the spokesperson, adding that the company has signed SPAs that correspond to its equity lifting volumes from the project. He declined to elaborate on buyers and supply destinations.

Mitsui joined the Arctic LNG 2 project in 2019 via a subsidiary called Japan Arctic LNG, which secured substantial financial support from state-owned Japan Organization for Metals and Energy Security (JOGMEC) as part of wider Japanese efforts to ensure stable LNG supply and diversify import sources.

Mitsui handles LNG marketing for Japan Arctic LNG's 10% equity offtake volume of 1.98 million mt/year from the project.

Novatek CEO Leonid Mikhelson said July 20 that first LNG from the project was still expected before the end of 2023, with ramp-up to design capacity between January and March 2024.

"We are going to meet the deadlines of the first line's launch scheduled for 2023," Mikhelson said at a ceremony to mark the dispatch of the first train from Murmansk for delivery to the project site on the Gydan peninsula.

In all, Arctic LNG 2 will have three production trains, each with a capacity of 6.6 million mt/year, giving the project a total capacity of 19.8 million mt/year.

The second and third trains are expected online in 2024 and 2026, respectively.

Novatek holds 60% in the project, alongside TotalEnergies (10%), Chinese companies CNPC and CNOOC (10% each) and Japan Arctic LNG (10%).

Japan's exposure

Russia's invasion of Ukraine in 2022 has complicated the situation over imports of Russian energy, with Japan pledging to phase out its Russian coal and oil imports.

The Japanese government, however, has made it clear that it intends to maintain stakes in the Sakhalin 1, 2 and Arctic LNG 2 projects in Russia, considering their significance for national energy security.

Russia was the third largest LNG supplier to Japan in the first half of 2023, with its LNG supply accounting for 9.5% of the country's total LNG imports of 32.62 million mt, according to the Ministry of Finance data.

Daisuke Harada, director and economist at JOGMEC's energy research division, told S&P Global in response to a question on whether Japanese companies would be able to lift Arctic LNG 2 supply: "Given the current absence of European and US sanctions on an embargo on [Russian] natural gas imports, there is no barrier to lift [from Arctic LNG 2] like the inflows from Sakhalin 2 to date."