$1B LNG Tanker Dispute: Russia’s Arctic LNG 2 Takes South Korea to Court
Arctic LNG 2 files $1.02bn claim against Hanwha Ocean over canceled 172,500 cbm gas carriers tied to sanctions-hit.
Russia’s Arctic LNG 2 project has filed a $1 billion arbitration claim against South Korean shipbuilder Hanwha Ocean, escalating a dispute over canceled liquefied natural gas (LNG) tankers. The claim, disclosed by Hanwha on September 1, alleges the company breached “Step-in Agreements” that would have allowed Arctic LNG 2 to take control of the vessels if the original owners failed to meet their obligations.
The conflict stems from a 2020 contract in which Daewoo Shipbuilding and Marine Engineering (DSME)—now part of Hanwha Ocean—agreed to build six Arc7 ice-class tankers for the Arctic LNG 2 project. Three were destined for Russian shipowners, who planned to lease them to Sovcomflot, while the remaining three were earmarked for Japan’s Mitsui O.S.K. Lines. The vessels were scheduled for delivery by July 2023, but DSME canceled the contracts in 2022 after sanctions over Russia’s war in Ukraine disrupted payments.
Russia’s Arctic LNG 2 Seeks $1 Billion in Damages Over Canceled Tankers
Hanwha Ocean has called the $1 billion figure preliminary, warning the final damages could exceed that amount. The company, which is already defending an $862 million claim from the original Russian shipowners, said it would contest the new arbitration in Singapore while pursuing an “amicable resolution.”
Natural Gas
Arctic LNG 2, majority-owned by Russian energy firm Novatek, was designed to produce 19.8 million metric tons of LNG annually, positioning it as one of Russia’s largest export facilities. Production began in December 2023, but the first cargoes did not reach end-users in China until August 2024, highlighting the project’s struggles under sanctions.
Sanctions Disrupt Ambitious LNG Project
The canceled tankers were critical to Arctic LNG 2’s expansion in the Russian Arctic. With legal battles ongoing, the project faces further delays in securing alternative vessels, potentially jeopardizing its ability to meet production targets. For Hanwha Ocean, the dispute adds to a growing legal burden, underscoring the risks shipbuilders face when geopolitical tensions derail long-term contracts.
“The claim amount was provided without detailed specification, and we believe it may exceed $1 billion. We will respond to the arbitration proceedings and continue to seek an amicable resolution.”
Hanwha Ocean
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