Christophe de Margerie LNG carrier

The icebreaking LNG carrier Christophe de Margerie. Photo: Koptyaev Igor / Shutterstock.com

Russian LNG Cargoes to Europe Disrupted by Looming Port Bans

Reuters
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March 2, 2022
Reuters

By Nora Buli, Jonathan Saul and Marwa Rashad

OSLO/LONDON, March 2 (Reuters) – Supplies of Russian liquefied natural gas (LNG) to Europe have been disrupted by uncertainty over whether ships can discharge cargoes at European ports due to sanctions imposed on Moscow, according to ship tracking data and trade sources on Wednesday.

The disruptions come at a time when Europe is contending with record prices for natural gas due to tight supplies that have ramped up energy bills and led governments to pay billions of dollars in subsidies to consumers struggling to stay warm.

Four tankers that loaded LNG at the Russian gas terminal in Yamal and initially said they were sailing to British and French ports have changed their destination status to “For Orders,” Refinitiv Eikon ship tracking data showed. That means the vessels are awaiting new orders from their owners. 

The change in destinations came after Britain said on Monday it was denying entry to British ports to ships that are Russian owned, operated, controlled, chartered, registered or flagged as it ratcheted up pressure on Moscow over the invasion of Ukraine.

The British move has added to the widespread disruption to energy markets caused by punitive measures the West has taken against Moscow, with traders steering clear of Russian fuel even though many of the restrictions, including Britain’s port ban, exempts Russian oil and gas in itself. 

“The UK’s decision to turn away Russian-flagged, operated or chartered vessels may materially tighten the market if this move is followed by other countries,” said Rystad Energy’s senior gas and LNG analyst Kaushal Ramesh. 

The diversion of the tanker closest to Britain, the Fedor Litke, helped propel British gas prices higher on Wednesday, Refinitiv analysts said.

The British front-month gas price rose more than 40% on Wednesday to 410 pence per therm but was still short of a record high of 453 hit on Dec. 21. The British day-ahead gas price rose 37% to 405 pence per therm.

EU CONSIDERS BAN

Russia has supplied 7.5% of Britain’s LNG imports so far this year and accounted for 19% of its imports in 2021, Ramesh said.

European Union states are also considering a ban on Russian ships entering the bloc’s ports to tighten sea restrictions after a halt in air traffic, European officials say, a step that would further hamper Russia’s commercial shipments.

The European Parliament on Tuesday approved a non-binding resolution calling for broader sanctions on Russia as well as for EU ports to be closed to Russian ships, and ships coming to or from Russia, except for “justified humanitarian reasons.” 

Trade sources said the new destination status for the four LNG vessels reflected caution over what will happen next with European ports.

The Dutch front-month gas contract, a European benchmark, ended trading 42% higher at 174 euros per megawatt hour (MWh) after setting a new record high of 185 euros/MWh.

Canada said on Tuesday that it too would shut its ports to Russian-owned ships later this week.

The Fedor Litke LNG tanker changed course late on Tuesday from its previous destination of Britain’s Isle of Grain gas import terminal.

That followed the diversion of the NS Champion, an oil tanker operated byRussian shipping company Sovcomflot, which diverted away from Britain on Monday and sailed towards Denmark instead.

A spokesperson for National Grid, which operates Isle of Grain, said: “We are fully supportive of government action to order UK ports to block allRussian-linked ships, and are in urgent discussions with government and customers to ensure this can be applied at LNG terminals.”

EXPORTS QUESTIONED 

The other three vessels – the Boris Davydov, the Christophe de Margerie and the Boris Vilkitsky – were headed to the Isle of Grain and French gas terminals at Montoir and Dunkirk before changing their destination status, the tracking data showed.

The controlling shareholder in Yamal LNG, Novatek, did not respond to requests for comment on the changes. The Christophe de Margerie is operated by Yamal LNG.

Greece-based Dynagas, which operates the Fedor Litke, Boris Davydov and Boris Vilkitsky according to shipping records, did not respond to a request for comment. 

The Montoir terminal was still expecting the Christophe de Margerie, said a spokesperson for the terminal operator Elegny, which is owned by Engie.

Another LNG vessel operated by Russian shipping company Sovcomflot, the La Perouse, was also expected at the terminal although it had no arrival date, the spokesperson said.

Sovcomflot has declined to comment this week. 

“The market seems to realize that Russia is not just a major pipeline exporter but also the world’s fourth largest LNG exporter,” analysts at Engie EnergyScan said in a note.

“With companies active in the LNG sector like Shell, BP and now Exxon Mobil deciding to exit the country and withdraw from their partnerships with Russian companies, the sustainability of Russia LNG exports is questioned,” they wrote.

(Additional reporting by Forrest Crellin in Paris and Kate Abnett in Brussels; Editing by Simon Webb and David Clarke)

(c) Copyright Thomson Reuters 2022.

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