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Boskalis Wins Suit Over its Exit From Russian LNG Plant Contract

novatek
Arctic LNG 2's three gravity-based structures at their permanent berths in the Gulf of Ob (illustration courtesy Novatek)

Published Jun 9, 2022 9:49 PM by The Maritime Executive

Boskalis has won a favorable judgement in a case related to its exit from Novatek's $21 billion Arctic LNG 2 project, which has been hit hard by sanctions on Russia's energy sector. 

Boskalis held a contract with Saren BV - a joint venture of Italian offshore engineering firm Saipem and Renaissance Heavy Industries - to prepare the foundation for the massive Arctic LNG 2 liquefaction terminal, a 20 million tonne per annum plant near Novatek's Yamal LNG. The unusual project design called for the construction of three complete liquefaction trains on prefabricated gravity-based structures (GBS) at the Port of Murmansk. When complete, these would be towed to a prepared site on the Gulf of Ob, where they would be permanently installed near shore and connected to a gas pipeline network. 

On March 4, after the Russian invasion of Ukraine began, Boskalis terminated its contract for the project with Saren BV. In turn, Saren made a claim against Boskalis for $42 million for alleged breach of contract. Boskalis contested this suit, and in a summary proceeding June 9, a judge ruled in its favor on all major points. The court found that Boskalis could not make any payments to either Saren or to the end client in Russia (Novatek). 

A separate lawsuit in Russia targeted two vessels that Boskalis left behind at the Port of Murmansk, the dredger Nordic Giant and the rock-dumping pontoon barge Arctic Scradeway. A subsidiary of Novatek filed suit in a Murmansk court to seize the two ships, and on May 12, the court agreed and transferred them to the custody of St. Petersburg-based Onego Shipping - with permission to use them, according to state-owned media.

Sanctions against the Russian LNG sector appear to be having a significant impact on Arctic LNG 2. The first train is nearing completion and was set to start up operations in 2023, but sanctions related to the invasion of Ukraine have put that timeline in doubt. The European Union now bans any export of goods or services related to natural gas liquefaction technology to Russian companies, and EU companies Technip and Linde are core technology providers for the plant. The module assembly yards in China that are prefabricating plant sections for Arctic LNG 2 are expected to suspend work on components after the first train, according to Upstream Online. "There are big difficulties due to the sanctions," Novatek CEO Leonid Mikhelson admitted at a shareholders' meeting in April.