With increasing geopolitical risks, many states, especially European countries, have begun to formulate security-focused roadmaps in their energy policies. With the advent of the liquefied natural gas (LNG) revolution, various shipment methods and countries’ energy export capabilities have undergone changes. Alongside the growing international competition, the dynamic nature of geopolitical fault lines has led to the analysis of regions that were previously off the agenda.
The increasing dominance of the United States (US) in the European energy market and the decrease in Russia’s energy revenues due to sanctions indicate that the market will witness greater competition in the coming years. The sector, which reached a total volume of $171.55 billion[1] in the 2022-2023 period, is now of vital importance for Europe. Europe is seeking to consolidate the dominance of the United States, which holds more than 50% of the export rate, and to develop a strategy against Russia’s LNG projects.
With the increasing partnership between Russia and China, one of the regions whose geopolitical importance has grown today is the Arctic. The Arctic region, which has become accessible due to global warming melting the ice caps, has turned into a new arena of competition and a focus of increasing interest, both with shorter sea trade routes, fishing potential, and identified mineral and hydrocarbon energy resources. This geopolitical rise and growing interest bring the concept of the “polar age” to the agenda.[2]
In the region, there are a total of 48 trillion cubic meters of natural gas reserves, along with which 90 billion barrels of oil and 44 billion barrels of natural gas liquids are produced. This potential represents 6% of the world’s proven oil reserves and 25% of the world’s total natural gas reserves.[3] In addition, the reason for the great cooperation between Russia and China through the Arctic region is that this is seen as the offshore part of the Silk Road Project.
The LNG project located in the remote northern regions of Russia, with a capacity of 20 million tons per year and three train units, holds critical importance for the Russian government and the project operator Novatek’s plans to expand LNG exports. The gas feedstock for the Arctic LNG 2 project is sourced from the Utrenneye field in the Gydan Peninsula of Western Siberia.[4] It is possible to say that Russia has significantly increased its energy capacity.
Russia’s largest LNG producer, Novatek, holds a 60% stake in the project, while China’s state oil companies, CNOOC Ltd and China National Petroleum Corp (CNPC), respectively hold 10% stakes. Additionally, a consortium consisting of TotalEnergies and Japan’s Mitsui and Co and JOGMEC each hold a 10% stake in the project.[5] It should also be noted that Japanese firms have maintained their determination to develop the projects. However, the withdrawal or passive stance of companies in the Western consortium to avoid being affected by US sanctions may pose a problem for Russia in the future. Nevertheless, it is noted that new sanctions imposed by the US could further weaken Russia’s position.
The Novıye İzvestiya portal has suggested that following Novatek’s Arctic LNG 2 project, the Yamal LNG project could also be subject to sanctions. Gazprom sold 140 billion m³ of natural gas to Europe in 2021, but this amount dropped to 24 billion m³ in 2023. Sectoral observers predict that this amount could further decrease to 15-16 billion m³ by 2025, and if there is no change in the geopolitical situation, this trend is expected to continue at least until 2030.
In 2023, a significant portion of the gas supplied by Gazprom was sold to Turkey. However, Turkey’s agreement with Gazprom is set to expire in 2027. Russia’s position in the liquefied natural gas (LNG) market is also fraught with uncertainties. It has been suggested that the United States, which has taken Russia’s place in the European market, will open up new fields and increase investments in the sector starting from 2025. Additionally, in December 2023, the US announced sanctions targeting one of Russia’s largest liquefied natural gas projects, Arctic LNG 2.
It is predicted that in 2025, the Yamal LNG project could also become a target of sanctions. The only exception is the Sakhalin-2 project, in which two major Japanese companies are involved. Mitsui and Mitsubishi have announced that they do not plan to withdraw from the project.[6] The Yamal LNG facility, actively facilitating the minimal gas flow exported by Russia to Europe, can be interpreted as an indication of the US strategy to completely eliminate Russian gas from the European continent.
[1] “EU27 spending on LNG imports by exporter country, 2022 v. 2023.”, IEEFA, https://ieefa.org/european-lng-tracker#reciteEnable, (Access Date: 02.05.2024).
[2] “Arktik bölgesi jeopolitiği”, AA, https://www.aa.com.tr/tr/analiz/arktik-bolgesi-jeopolitigi/1459727, (Access Date: 02.05.2024).
[3] “Buzullar eriyor, yeni deniz yolları ortaya çıkıyor”, Deniz Haber, https://www.denizhaber.net/buzullar-eriyor-yeni-deniz-yollari-ortaya-cikiyor-haber-107568.htm, (Access Date: 02.05.2024).
[4] “Gas output too low to sustain new LNG production at Russian project”, Upstream, https://www.upstreamonline.com/lng/gas-output-too-low-to-sustain-new-lng-production-at-russian-project/2-1-1619098, (Access Date: 02.05.2024).
[5] “Russia’s Arctic LNG 2 last line is on hold, TotalEnergies CEO says.”, Reuters, https://www.reuters.com/business/energy/russias-arctic-lng-2-last-line-is-hold-totalenergies-ceo-says-2024-02-08/, (Access Date: 02.05.2024).
[6] Same source.
