Russia’s Novatek has warned that the government’s increased tax take on the country’s largest liquefied natural gas development may put development of its next two LNG projects at risk.

The Russian government relies on income from oil and gas to fund its budget, but has experienced a major drop in revenues from the sector as it struggles to overcome sanctions imposed by Western nations in response to Russia’s invasion of Ukraine last year.

The Russian Finance Ministry reported a 2.4 trillion roubles ($29 billion) federal budget deficit for the first quarter of the year, and the government has been encouraging the country’s gas producers to focus on LNG developments to help counter the absence of pipeline gas exports supplies to Europe that dropped by more than 70% over the past year.

The government hopes to almost treble the volume of LNG that Russia supplies to global markets to 100 million tonnes per annum before the end of 2030.

Novatek is Russia’s leading independent gas producer, with its main focus on LNG developments, including the country’s largest, the Yamal LNG project on West Siberia’s Yamal Peninsula, in which it holds a 50% interest.

Yamal LNG remains a major source of revenue for Novatek since coming online in December 2017, while domestic pipeline gas sales from the company’s brownfield developments in West Siberia have also traditionally produced strong profits, according to the player’s corporate disclosures.

However, following last year’s decision to increase corporate profit tax for Yamal LNG to 34% from 20%, the project will be required to pay an estimated 200 billion roubles to the federal budget between 2023 and 2026, Moscow business daily Kommersant quoted Novatek executive chairman Leonid Mikhelson as saying.

Mikhelson has reportedly asked Prime Minister Mikhail Mishustin to allow Novatek to postpone until the end of this year the payment of at least 40 billion roubles in taxes for Yamal LNG due for 2022, according to Kommersant.

Another major concern for Novatek is the value of the Russian rouble, which has weakened against other currencies and dropped in value by more than 12% against the US dollar during the first quarter this year.

Novatek needs US dollars and Chinese yuan to continue with existing orders in China to source replacements for Western equipment contracted for Arctic LNG 2 but lost due to international sanctions.

Acknowledging concerns about raising external financing because of international sanctions, Mikhelson said that Novatek expects to invest 400 billion roubles this year alone in its next two LNG developments, Arctic LNG 2 on the Gydan Peninsula and the Obsky Gas Chemistry Complex on the Yamal Peninsula.

Arctic LNG 2 is expected to send almost 20 million tonnes of LNG to international markets from three trains, installed on concrete gravity-based platforms.

Novatek in February said that it expects to start towing out the first LNG train from a yard near the Russian port of Murmansk in August, with the facility planned to produce first LNG before end of this year.

The Obsky Gas Chemistry Complex development will aim to produce 5 million tonnes per annum of LNG.

Volumes are expected to be exported to international markets via the port of Sabetta on the Yamal Peninsula, which also services Yamal LNG.

Yamal LNG had not replied to Upstream’s request for comment by the time of publishing.