European market still in focus but increased gas supplies expected to flow to Russia’s Asian allies
Russia’s liquefied natural gas production and exports look certain to hit an all-time high this year following the completion of extensive maintenance works at the Yamal LNG and Sakhalin 2 developments and the expected start-up of the first train at Arctic LNG 2, according to industry analysts.
The ramp-up is unlikely to be impacted by the efforts of European authorities to reach consensus on barring Russian LNG purchases, with incremental LNG production expected to flow east rather than westward.
Despite being technically able to produce first LNG, the first train of Arctic LNG 2 is still not yet ready to start full commercial operations and launch first exports, Kpler lead analyst Viktor Katona said.
However, once the first train is up and running, “Russia’s LNG exports will move into the next gear, and the country may finish this year with around 35 million to 36 million tonnes” of LNG shipped to international markets, Katona said.
In total, Russia exported about 32.3 million tonnes of LNG in 2023 against 32.9 million tonnes in 2022, according to an independent assessment by Kpler based on the global movement of gas carriers.
Extensive maintenance work at Novatek’s Yamal LNG and Gazprom’s Sakhalin 2 projects led to a total production loss of about 2.4 million tonnes of LNG last year compared with 2022.
The decline was mostly offset by the Portovaya LNG facility on the Baltic Sea that until recently was fully owned by Gazprom.
Portovaya LNG came into operation in September 2022 and almost reached its nameplate capacity of 1.5 million tonnes of LNG in 2023, with exports mostly headed to European ports.
As a result, Russian LNG exports to EU countries reached a new high of 15.55 million tonnes last year, up from 15.34 million tonnes in 2022, Katona said.
Spain became the largest importer of Russian LNG in Europe, at over 5 million tonnes, and the third-largest buyer of Russian LNG globally, according to the analyst.
Belgium — typically not an end Russian gas consumer, but where Novatek has a long-term contract to use transshipment and regasification facilities in Zeebrugge — imported just over 4.9 million tonnes of Russian LNG that was either reloaded onto other carriers or entered the European gas network, according to Kpler’s calculations.
France was Europe’s third-largest importer, taking about 3.6 million tonnes of Russian LNG.
With Novatek holding a 60% share in Arctic LNG 2 and thus the right to export a major share of the production from the first train, Katona expects the company to start filling its already allocated long-term agreements once the first train starts operations.
Novatek said in December that it would continue with Arctic LNG 2 despite US sanctions on the project.
These sanctions led to force majeure notices sent to LNG contract holders and the project’s foreign shareholders, France’s TotalEnergies, China National Petroleum Corporation, China National Offshore Oil Corporation and Japan Arctic, a joint venture between Japan’s Jogmec and Mitsui.
Novatek’s LNG supply agreements, with the exception of a deal with Spain’s Repsol, are focused on either China or India, and incremental shipments of Russian LNG in 2024 will be tightly linked with higher flows to Asia, Katona said.
Russian LNG exports to China ended the last year at over 6.8 million tonnes, making it Russia’s largest gas customer, while shipments to India were a modest 430,000 tonnes, according to Kpler data.
China and India are already the two largest buyers of Russian oil.
Speaking at the end of December to Russian state television news channel Rossiya24, Russian Deputy Prime Minister Alexander Novak acknowledged that in 2023, China purchased between 45% and 50% of Russian oil and oil products. India was second with about 40% of Russian oil and products.
Author: Vladimir Afanasiev