Putin’s Suggestion to Divert LNG From EU Right Now Faces Hurdles

Article content(Bloomberg) — When Russian President Vladimir Putin suggested there could be an immediate halt to liquefied natural gas supplies to Europe, he was making the most of a moment of vulnerability for the continent. Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThe region had just seen the worst gas price spike in years as the Iran war shut off LNG supplies from the Middle East. Several European countries still purchase Russian cargoes, and the pool of alternative supply had shrunk dramatically.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentRussian LNG already faces a gradual ban in the European Union by 2027. But there are several obstacles to Putin’s idea to divert supply to Asia immediately — notably long-term contracts and a lack of tankers.Article contentArticle content“The only Russian gas that can even theoretically be redirected to Asia from Europe is the gas coming from Yamal LNG,” said Ronald Smith from Emerging Markets Oil & Gas Consulting Partners LLC. Supply from other projects in the country is already off limits due to sanctions.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentEurope has been the primary market for the giant Yamal LNG plant, which sits above the Arctic Circle. Its supplies covered nearly 18% of the European Union’s imports of the fuel at the start of this year, according to ship-tracking data compiled by Bloomberg.Article contentSupply ContractsArticle contentYamal LNG’s supply to Europe is tied to long-term contracts that would carry legal penalties if they are broken, said Iryna Sereda, leader of the Europe gas team at BloombergNEF. Article content“A commercial decision to prioritize other markets does not qualify as force majeure,” which is a clause that permits a seller to break a contract without penalty due to events beyond their control, said Agnieszka Ason, an energy lawyer and visiting research fellow at the Oxford Institute for Energy Studies. Article contentRussia’s Novatek PJSC, which owns 50.1% of Yamal LNG, and France’s TotalEnergies SE, with a 20% interest, did not respond to requests for comment. Spain’s Naturgy Energy Group and Germany’s SEFE, among the European buyers of cargoes from Yamal LNG, declined to comment.Article contentArticle contentLack of TankersArticle contentEven if some Yamal LNG redirections from Europe to Asia were legally possible, they would be logistically challenging, said Smith.Article contentYamal LNG currently reloads its cargoes from ice-class tankers to conventional vessels in the Russian port of Murmansk. From there, it’s a journey of some 1,600 to 1,800 miles to terminals in France and Belgium. The distance to Asian ports is around 12,500 nautical miles, Smith said.Article content“Additional conventional ships will be necessary to make the longer run,” he said. Article contentRerouting all of Yamal’s exports to Asia would require as many as 60 conventional LNG tankers, compared with 17 the project had in operation last year, according to BloombergNEF.Article contentSpeaking on Friday, Russia’s Deputy Prime Minister Alexander Novak gave no specific timetable for diverting cargoes destined for Europe, although he said it could be done in the near future.Article content“Some of the LNG volumes currently supplied to Europe will be redirected to other markets where constructive, pragmatic relations are being built with our country, where there is demand and the possibility of concluding long-term contracts,” he said, according to Interfax. 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Visit our Community Guidelines for more information. Bank of Canada governor warns of growing risks to financial stability Economy South Bow confirms open season for new pipeline to the U.S. using legacy Keystone XL permits Oil & Gas Beer, wine sales fall even more, putting tax revenues on the rocks, but one boozy drink is on the rise Retail & Marketing U.S. aluminum buyers hunt for alternatives as Iran war upends global supply Commodities ‘As dead as fried chicken’: Why Trump finally fired Noem Economy