AN INAUGURAL export from Russia’s sanctioned flagship Arctic LNG 2 project appears to be underway via a Dubai-controlled LNG carrier currently “spoofing” its location.

Satellite imagery indicates that Palau-flagged LNG carrier Pioneer (IMO: 9256602) arrived at the Novatek Ob Bay Arctic facility on August 1, despite its Automatic Identification System placing the vessel in a holding pattern over 800 miles away since leaving Norwegian waters on July 21. 

Pioneer is one of several LNG vessels that have recently changed ownership and have been maintaining similar holding patterns. They are thought to be part of a nascent fleet of ‘dark’ LNG vessels being readied to service Russia’s increasingly sanctioned LNG sector. 

The US directly sanctioned Russia’s Arctic LNG 2 project in a bid to ensure that the project, thought to have cost in the region of $25bn to construct, would be rendered “dead in the water”.  

US sanctions have targeted operating companies for the Arctic LNG 2 project, storage vessels, shipping companies it suspected were seeking to buy specialised carriers for the project, and companies working on a second facility near the Baltic Sea. 

So far those sanctions have worked. While the facility began production in December, no LNG has been shipped as restrictions kept foreign companies away and stopped delivery of the specialised, ice-ready carriers.

However, the arrival of Pioneer suggests the long-anticipated plan B approach of a more limited “dark fleet”* LNG operation is about to get underway. 

Lloyd’s List Intelligence AIS vessel-tracking showed the Palau-flagged Pioneer, sold to Dubai-based NUR Global Shipping in April by Chinese trader Jovo Group, sailing north through the Norwegian Sea in mid-July. It adopts a consistent looping pattern for a brief period until sailing further and leaving Norway’s EEZ on July 23 where is begins moving in an oval shape.

The pattern of the AIS combined with absent heading data and consistent speed over ground unchanged for over a week, all indicates that the ship is spoofing its location. Satellite imagery from Planet Labs on August 1 shows a vessel matching Pioneer’s size and specification berthed at the Arctic LNG 2 facility, a significant distance from where the AIS places the ship. 

The satellite image also shows a visible flame at a nearby facility, likely flaring gas, suggesting that the facility is ramping up LNG production.

Assuming that Pioneer does load the cargo, which is expected to be sold at a discount due to the quality uncertainty of an initial shipment, governments and industry will be watching carefully to assess who will be the ultimate offtaker of the gas. 

While the EU and Asia have not imposed direct sanctions on the imports of Russian LNG, Brussels barred the transhipment of Russian LNG at EU ports in June, limiting Russia’s options for distributing its gas globally. That, combined, with the existing US sanctions will limit the available destinations of the gas.

“Bringing a cargo like this into Europe, even if it’s not formally prohibited politically, reputationally I think would be very hard at this point,” said Eikland Energy managing director Kjell Eikland. 

“So Türkiye is pretty much the only place that I see as an opening for them, but even they have been turning to the US recently and so I think they may have to go to India or the Near East to find an offtaker.”

According to Eikland, Pioneer will likely attempt to leave in a similarly clandestine manner as it arrived, however. 

“Since the ship is not permitted for [northern sea route] travel, we believe it will reappear along the Norwegian coast, to seamlessly tie into a return from its current AIS-reported circling pattern.”

At that point, Arctic LNG 2 operator Novatek could go public with its inaugural cargo for a project that has been central to Moscow’s energy export plans and routinely thwarted by four separate waves of US sanctions and the prospect of more to come.

France’s TotalEnergies, which holds 10% of Arctic LNG 2, declared a force majeure earlier this year, indicating it can’t supply customers due to circumstances beyond its control.

The Kremlin has set an ambitious plan to commission 100m tonnes of LNG capacity by 2030 but, according to Rystad Energy, forecasts show the country will miss that target by as much as 60m tonnes.

According to Eikland, this could be further hampered by more sanctions yet to come. 

“The first loading at Arctic 2 LNG is politically a major event, and with the emergence of a dedicated fleet we find it likely that the [ships loading at Arctic LNG 2] will be directly sanctioned in coming separate US Ofac and EU packages,” he said.

* Lloyd’s List defines a tanker as part of the dark fleet if it is aged 15 years or over, anonymously owned and/or has a corporate structure designed to obfuscate beneficial ownership discovery, solely deployed in sanctioned oil trades, and engaged in one or more of the deceptive shipping practices outlined in US State Department guidance issued in May 2020. The figures exclude tankers tracked to government-controlled shipping entities such as Russia’s Sovcomflot, or Iran’s National Iranian Tanker Co, and those already sanctioned.

Download our explainer on the different risk profiles of the dark fleet here