Challenges in LNG delivery amidst Russia's energy market stability

(Reuters) - There is no need for Russia to ban exports of diesel to tackle rising prices and possible shortages of the fuel after drone attacks reduced refining capacity, Deputy Prime Minister Alexander Novak said on Friday.

Speaking to reporters, Novak also said, without elaborating, that the Novatek-led Arctic LNG 2 project, which started tentative production in December, remains in talks about LNG deliveries as Western sanctions hinder the availability of tankers for the project.

Russia has faced a steep reduction in oil refining capacity, crippled by technical outages and drone attacks. It banned exports of gasoline for half a year starting from March 1.

Refining capacity shut down by drone attacks has reached 14% of Russia's total oil refining capacity, according to Reuters calculations. The country's total daily offline primary oil refining capacity has jumped by around a third in March from February to 4.079 million metric tons.

Novak said that other oil refineries managed to boost their output, while the government is working on the issue of fuel deliveries from plants amid railway bottlenecks.

"The situation in the oil products market is stable today," Novak said.

"Our companies have already increased the load at the available capacities. It allowed for more supply, including... gasoline and diesel fuel."

Speaking about a technical outage at the Norsi refinery, Russia's fourth-largest by output, Novak said that a malfunctioning turbine may resume operations in a month or two.

Industry sources have said one of two catalytic crackers remains out of action at the plant.


In comments about Arctic LNG 2, key in Russia's plans to gain a fifth of the global liquefied natural gas market share by 2030-2035, Novak said that Novatek has been in talks about cargo delivery.

The company has said commercial LNG supplies from the project were due to start in the first quarter of 2024.

However, Washington in November imposed sanctions against the project that followed separate measures related to the project in September, over Russia's conflict with Ukraine.

The project also has the challenge of securing gas carriers.

Fearing a backlash from the sanctions, foreign shareholders suspended participation in the project, renouncing their responsibilities for financing and for offtake contracts for the plant.

Responding to a question on when the first LNG cargo will be delivered from the project, Novak said that "the company is dealing with the issues, corresponding talks are under way".

"Their main problem is with the tankers," he added.

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