Russia, apparently, has begun exporting sub–sanctioned LNG from the Arctic LNG -2 plant, which came under severe sanctions just before its launch at the beginning of the year. Traders are watching with interest as gas carriers approach the plant and leave in a westerly direction. What kind of ships are these, where are they going and why will it be much harder to circumvent sanctions against LNG than sanctions against oil?
Traders are watching with interest how the second tanker has already begun exporting LNG from the Arctic LNG –2 substation plant. This is a new plant that was launched at the beginning of the year, but it immediately came under severe US sanctions. Therefore, the export of LNG from the new plant has not yet been carried out. But, apparently, the owner of this plant, Novatek, began testing the export of products in the same way as it was done in the case of oil.
There have already been rumors that someone on the global market is buying up gas carriers, probably in the interests of Russia. And now the tracking systems have shown that two gas carriers have begun to export LNG from Arctic LNG –2.
The first Pioneer tanker has already reached the Mediterranean Sea. "This means that either the gas carrier will take a risk and pass through the Suez Canal. There is a question here: will the Americans prevent passage, although formally the tanker and its owner are not under sanctions, so it is possible to accept money from him for passage through the Suez Canal. Or the tanker will try to unload somewhere, for example, in Turkey or North Africa. But, most likely, the tanker will go through the channel somewhere to Asia, for example, to China," says Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund.
The second gas carrier Asya Energy, which was captured by satellite images at the Arctic LNG – 2 plant last weekend, is still following the path of the first one – and also headed west.
Both vessels indicate their destinations as "on order," and their draft data – which indicates their depth below the waterline, giving clues about their loading – has not been updated.
What are these ships, what are they doing and where are they going?
"The Pioneer gas carrier was built in 2005, Asya Energy – in 2002, these are far from new vessels," says Marcel Salikhov, director of the HSE IGMU Center for Economic Expertise. The Pioneer gas carrier was previously owned by the Chinese carrier Jovo Group, and Asya Energy was owned by a Nigerian company. Recently, these vessels were sold to new owners, and now they belong to independent foreign companies and have started transporting Russian LNG, Salikhov notes.
"The tanker is operated by an Indian company established in June, and it is owned by a company from the UAE. The real beneficiaries of the companies are unknown," notes Sergey Kaufman, analyst at Finam Financial Group.
Experts assess the experience of using the shadow fleet to circumvent sanctions against Russian oil as successful. Therefore, it would be logical to transfer it to the gas sphere. However, there are more difficulties in circumventing LNG sanctions than in circumventing oil sanctions.
The first difficulties are in logistics and the fleet for LNG transportation. It is necessary to assemble several dozen tankers in order to form a full-fledged fleet for the export of LNG. Unlike oil, LNG needs to be exported from the Arctic, so special ice-class tankers are needed here.
"The market for gas carriers is much smaller than the market for oil tankers, so it is more difficult to buy them.
There are fewer than a thousand gas carriers operating now, while there are tens of thousands of oil tankers," says Salikhov.
The main problem is that ice–class gas carriers are needed for shipment in winter, and it is generally impossible to buy them on the secondary market. "There are no such Arctic 7 gas carriers in the world at all, except for those 15 units that were built for Yamal LNG. Another 15 pieces were ordered at our Zvezda shipyard. But so far they promise to deliver only two such gas carriers by the beginning of next year," says Yushkov.
In summer, as now, export from Arctic LNG – 2 is possible by conventional gas carriers, however, for year-round wiring, Arctic class gas carriers cannot be dispensed with. Therefore, it is important that the project receives these two Arctic 7 gas carriers from the Zvezda shipyard.
"In winter, the ice situation will be tense even in the western part of the Northern Sea Route and in the Gulf of Ob. Therefore, I think that in the future Novatek will start using the LNG transshipment hub in the Murmansk region, which is already ready and also came under sanctions. With the help of these two tankers, Arctic 7, which will receive from Zvezda, will deliver gas to the Murmansk region, ship it to storage, from where LNG will be picked up by non-ice class tankers and transported further to Asian markets – through the Suez Canal or around Africa. Ice tankers will operate purely as shuttles: to carry LNG from the Gydan Peninsula to the Murmansk region and back. Then there are fewer ice tankers than conventional gas carriers, which can still be found on the market," Yushkov argues.
The second problem is related to finding a buyer for the sub-sanctioned LNG from the project.
"US sanctions on oil are milder than in relation to Arctic LNG – 2. The US did not prohibit anyone from buying Russian oil, only the EU itself refused. But globally, they only banned the transportation of Russian oil if it costs more than $ 60 per barrel. Moreover, the responsibility for the violation of transportation is not fatal – it will be impossible to carry any oil for two months. And for Arctic LNG – 2, any contacts are prohibited, including it is forbidden to buy products," the FNEB expert notes.
Sergey Kaufman from Finam is optimistic: "Using the example of oil, we see that Chinese and Indian buyers are partially ready to interact with sanctioned companies if they give a discount on goods. We believe that in the case of LNG, the picture will be similar – Russian LNG will be sold at a discount."
The third problem is technological. During the construction of the first stage of Arctic LNG – 2, all Baker Hughes turbines were delivered before the sanctions. There were already not enough turbines for the second stage of the plant, so it was decided to build a power plant, and with the third stage the situation is even more difficult – neither turbines nor even ready-made modules from China were delivered for it, from which the LNG plant is being assembled. "Each subsequent queue suffered more from sanctions. And every new LNG project will face all these three problems," Yushkov believes.
Novatek will have to find solutions to all these problems. First of all, to test the scheme of LNG export from Arctic LNG – 2 and find someone who is ready to buy the sanctioned goods. If the project manages to survive under sanctions and solve these problems, then by its example it will give the green light to the appearance of new LNG plants in Russia.
Arctic LNG – 2 will survive, but sanctions make it difficult both to build new plants and to transport cargo to customers, Salikhov concludes.
"Arctic LNG–2 will probably operate in a limited format in the near future and not all year round," Kaufman suggests. – So far, we are talking about longer deadlines for the implementation of projects against the background of a shortage of suitable gas carriers and the search for sales markets. In the baseline scenario, we expect that the first two lines of Arctic LNG – 2 will be launched within two to four years against the background of growing demand for LNG in the Asia-Pacific markets."
Olga Samofalova
