Arctic LNG 2 Hits Hanwha Ocean With Another $1bn Claim Over Canceled Arc7 Tankers
🔔 Subscribe to ShipUniverse Weekly →
Russia’s Arctic LNG 2 has opened a new arbitration against South Korean shipbuilder Hanwha Ocean at the Singapore International Arbitration Centre, seeking an initial $1 billion in damages over alleged breaches of Step-In Agreements connected to three canceled Arc7 LNG carrier contracts. Hanwha disclosed the claim at KRW 1.3703 trillion, equal to 22.2% of its consolidated equity at the end of 2025, and said the claimant believes the amount could ultimately exceed $1 billion once the damages are specified. The case is separate from an ongoing arbitration launched in 2023 by three Russian shipowners seeking about $862 million over the cancellation of the same three 172,500-cubic-meter LNG carriers. The vessels were originally ordered from Daewoo Shipbuilding & Marine Engineering, now Hanwha Ocean, as part of the shipping program for Novatek-led Arctic LNG 2 before the contracts were terminated in stages during 2022 amid sanctions-related payment problems. Hanwha said it plans to respond through the SIAC process while continuing efforts to reach an amicable resolution.
Arbitration Exposure Snapshot
A new claim from the LNG project company adds a second major arbitration layer around three canceled Arc7 LNG carrier contracts.
Arctic LNG 2 alleges breaches of Step-In Agreements linked to the terminated shipbuilding contracts.
Hanwha converted the initial claim to KRW 1.3703 trillion against KRW 6.175 trillion of consolidated equity.
Three Russian shipowners are separately challenging the termination of the same vessel contracts.
The vessels were designed as high-specification icebreaking LNG carriers for Arctic operations.
Hanwha plans to form the tribunal, file its response and continue seeking an amicable resolution.
Arctic LNG 2 - Hanwha Dispute Board
The current $1 billion claim sits on top of a contract dispute that began with a 2020 Arc7 newbuilding program and expanded after the 2022 sanctions shock.
| Date / Layer | Development | Vessel / Contract Position | Claim or Financial Reference | Legal / Sanctions Position | Current Connection |
|---|---|---|---|---|---|
| OCTOBER 2020 Arc7 Orders | DSME secured a three-vessel order associated with Russian shipowners and Sovcomflot for Arctic LNG 2. | Three 172,500 m³ membrane-type Arc7 LNG carriers, originally scheduled for delivery during 2023. | Original three-vessel contract reported at approximately KRW 1.1 trillion, around $872 million at the time. | Contracts were signed before the post-Ukraine escalation in Western sanctions against Russian maritime and financial interests. | These are the three underlying vessels now connected to both major arbitration proceedings. |
| 2020 PROGRAM 6 Ships Total | DSME ultimately had six Arc7 LNG carriers tied to the Arctic LNG 2 transportation system. | Three were associated with the Russian/Sovcomflot structure. Three additional vessels were ordered for Mitsui O.S.K. Lines. | The two three-ship groups formed a major Korean contribution to Arctic LNG 2's planned icebreaking shipping fleet. | MOL's charter agreements with Arctic LNG 2 were announced separately in October 2020. | The present Hanwha disputes concern the Russian-linked three-vessel tranche rather than the full six-vessel program. |
| 2022 3 Cancellations | DSME terminated the three Russian-linked shipbuilding contracts in stages. | The first termination was disclosed in May, followed by additional cancellations during the year. | Missed contractual payment deadlines were cited as the immediate basis for the cancellations. | The payment disruption developed against the backdrop of sanctions imposed following Russia's invasion of Ukraine. | The legality and contractual consequences of these terminations now sit at the center of the arbitration complex. |
| MAY 2023 First Arbitration | Three Russian shipowners initiated arbitration proceedings in Singapore challenging the cancellations. | The proceeding concerns the same three canceled Arc7 LNG carriers. | The shipowners are reported to be seeking approximately $862 million. | The dispute continued after Hanwha Group acquired DSME and renamed the shipbuilder Hanwha Ocean. | This proceeding remains separate from the newer Arctic LNG 2 claim. |
| NOVEMBER 2023 Project Sanctioned | The United States formally designated LLC Arctic LNG 2 under Executive Order 14024. | Sanctions further complicated vessel access, financing, logistics and commercial operations around the LNG project. | No direct arbitration value is attached to the designation itself. | U.S. persons generally became prohibited from transactions involving blocked property or interests unless authorized. | The project later adapted its export logistics while remaining subject to U.S. restrictions. |
| SEP. 1, 2026 Second Claim Layer | LLC Arctic LNG 2 filed its own arbitration against Hanwha Ocean at SIAC. | The project company alleges Hanwha breached Step-In Agreements associated with the terminated vessel contracts. | Initial claim: $1.0 billion, converted by Hanwha to KRW 1.3703 trillion. | Hanwha said the initial amount was presented without detailed specification. | The claimant expects the damages amount may ultimately exceed $1 billion as the arbitration progresses. |
| CURRENT SIAC Process | Hanwha plans to participate in formation of the arbitral tribunal and submit its formal response. | The physical vessel contracts, charter structure and Step-In Agreements are now central to overlapping disputes. | A mechanical sum of the two headline claims is approximately $1.862 billion. | That figure is not an award, accounting loss or forecast liability because the claims are separate and may involve overlapping damages. | Hanwha says it will actively defend the proceedings while continuing efforts toward an amicable resolution. |
Hanwha Ocean Claim Exposure Analyzer
Stress-test different settlement or award scenarios across the new Arctic LNG 2 claim and the existing Russian shipowner arbitration without treating headline claims as confirmed liabilities.