The European Commission (EC) this week is considering a ban on transshipments or re-exports of Russian LNG through European Union (EU) ports as part of Brussels’ latest sanctions package.
The UK, Poland, Estonia, Latvia, Lithuania, and Germany have banned Russian liquified natural gas imports, but an EU-wide ban on Russian LNG imports is not included as part of the proposed sanctions. The focus remains on stopping the transhipment of LNG and its re-export to other countries using European ships.
“All decisions on sanctions are taken unanimously by member states in the council,” a spokesperson for the EC told NGI, saying they could not confirm the contents or timing of upcoming packages.
Transshipments are the transfer of LNG between two ships, either directly or via storage tanks. Several European ports are used as key transfer points. The EU transshipment sanction would be a major LNG trade flow issue for Russia after U.S. sanctions imposed late last year have affected the sale, transport and transshipment of LNG from PAO Novatek’s 19.8 million tons (Mt)/year Arctic LNG 2 facility.
More than 85% of all Russian LNG imported into the EU in the first four months of the year has been sent to Zeebrugge, Belgium, followed by Montoir-de-Bretagne, France and Bilbao, Spain, according to Institute for Energy Economics and Financial Analysis (IEEFA) analyst Ana Jaller-Makarewicz.
EU’s imports of Russian LNG have increased 14% year-to-date when compared to the same period last year.
Comparing the first four months of 2024 with the previous year, transshipments have increased by 34%, Jaller-Makarewicz told NGI.
“There's the risk that these countries could re-export Russian LNG via pipeline and/or as LNG,” she added.
Transshipments are important to Russia as LNG delivered from Novatek’s Yamal export facility need ice-class vessels, which are in short supply, to deliver the super-chilled fuel from the Yamal Peninsula in Russia’s far north to European ports. Some of those volumes are then re-exported to non-EU countries, freeing the ice-class vessels to return to Yamal LNG to reload.
An EU ban would cause delays for Yamal deliveries as Novatek may have to resort to ship-to-ship transfers of LNG at sea, which would take longer and require specific weather conditions.
If a ban is included in the 14th sanctions package, how EU importers would comply, especially given that they hold long-term contracts, is uncertain.
TotalEnergies SE and Shell plc have long-term contracts for 1 million metric tons/year (mmty) and 0.9 mmty for transshipments of Russian LNG from Yamal via Montoir-de-Bretagne ending around 2040. Zeebrugge’s LNG terminal operator Fluxys has a 20-year contract with Yamal LNG to transship up to 8 mmty via the Belgian port.
The proposed sanction on EU transshipments, if passed by EU members, would be another financial blow to Russia, especially after state-owned Gazprom PJSC announced its first annual loss last week in more than 20 years.
Gazprom stopped publishing export data at the beginning of 2023, but gas deliveries to Europe according to media reports, dropped over 55% last year to an estimated 28.3 billion cubic meters (Bcm).
The natural gas giant reported a $6.9 billion net loss for 2023, down from a $13.1 billion net profit in 2022.
Halting transshipments of the Russian super-chilled fuel at European ports with EU sanctions would stop the Kremlin from earning hundreds of millions of dollars in export revenue.
