Home MOREBUSINESS & ECONOMY EU Sanctions Prompt Russia to Rethink Arctic LNG Export Routes

EU Sanctions Prompt Russia to Rethink Arctic LNG Export Routes

Melting Profits: EU Sanctions Push Russia to Realign Arctic LNG Export Paths

by EUToday Correspondents
LNG terminal Zeebrugge
The recent imposition of a new package of sanctions by the European Union has prompted Russia to consider adjustments to its Arctic liquefied natural gas (LNG) transportation routes, potentially disrupting its current flow of exports through Europe.
Icebreaking LNG tanker

Icebreaking LNG tanker

Currently, Russian terminals situated along the Arctic coast, such as the “Yamal LNG” terminal, export gas through Europe. This process involves transferring Russian Arctic LNG from specialised transport vessels, adapted to extreme low temperatures, to conventional tankers in ports in Belgium and France, which then continue their journey to Asia.

However, a portion of the Russian LNG that undergoes this transhipment process in European ports ends up on European markets. The EU aims to curtail this practice through the new package of sanctions.

EU policymakers are discussing this measure as part of the 14th package of sanctions against Russia. While it may not entail a complete ban, it marks the first instance of Europe taking specific actions against Russian LNG.

If approved, this measure could lead to increased volumes of Russian fuel circulating within Europe. It may also create logistical challenges for European companies and provoke political reactions from other gas-buying countries.

For instance, Novatek, a major Russian gas producer, could redirect cargoes intended for Asia to Europe and utilise local swaps, thereby sourcing gas from other suppliers to fulfil contracts with Asian clients.

Consequently, this move could expose European governments to accusations of boosting Russian LNG supplies, despite claims of attempting to minimise them, as noted by James Voddel, the head of European gas and global LNG at Energy Aspects.

For Russian deliveries, this shift would complicate logistics. For Novatek’s plants, which export the majority of LNG, stops at EU ports are necessary in all seasons except summer and autumn, when the Northern Sea Route clears of ice, allowing direct exports to Asia. According to Energy Aspects, shipping cargoes from the Yamal LNG plant directly to Asia would increase freight and logistics costs, as well as prolong icebreaker downtime.

In the event of sanctions, Russia could explore alternative delivery routes, such as utilising its port in Murmansk or increasing exports during the summer season. However, these options represent mere palliatives for Russian exports.

Under such scenarios, Russian contracts for supplying 3 million tons of LNG to China annually could suffer, potentially triggering a response from Beijing.

Additionally, European companies like the German state-owned enterprise Securing Energy for Europe GmbH, Shell Plc, and TotalEnergies SE may be adversely affected by the new sanctions. They rely on transshipment of Yamal cargoes in Zeebrugge and Montoir. With their contract terms extending to 2038 and 2041, any prohibition on transshipment could potentially lead to force majeure declarations or contractual disputes.

Read also: 

EU Proposes 14th Round of Sanctions Against Russia: What’s Included?

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