March 1, 2022

One Russian LNG vessel diverted from the UK as it bars port access to Russia-connected ships

Russia’s Sovcomflot-owned 172,600 m3 Christophe de Margerie ice-class LNG carrier has diverted away from the UK and is sailing to France’s 8 mtpa Montoir LNG receiving facility, following the UK’s decision to ban ships with Russian connections entry to its ports.

The Secretary of State for Transport Grant Shappe instructed UK ports in a notice yesterday to deny access to any ship which they have reason to believe is “owned, controlled, chartered or operated by any person connected with Russia” and which is flying the Russian flag and registered in Russia. The UK can receive LNG at the 14.3 mtpa Grain, 5.6 mtpa Dragon and 15.4 mtpa South Hook terminals.

The port entry ban is among several punitive measures that the UK, along with the US and EU, has imposed on Russia in response to its invasion of Ukraine.

Kpler data show that Christophe de Margerie left the Novatek-operated 17.4 mtpa Yamal LNG facility on Feb. 26 after loading a cargo, which it was initially expected to deliver to the 14.3 mtpa Grain LNG terminal in the UK on Mar. 4. The vessel changed course for Montoir yesterday. Market participants suggested the diversion could have been executed as part of a cargo swap, but this could not be confirmed.

The vessel’s diversion to Montoir follows a spate of LNG vessel diversions from Asia to Europe in December and January as European gas prices were at a substantial premium to Asian LNG prices in late December. This lifted imports into the continent to an all-time high in January of 11.56 mt.

Christophe de Margerie had previously transferred its cargo from Yamal to the 174,000 m3 Pearl LNG tanker through a ship-to-ship transfer (STS) at Montoir during its previous voyage from Yamal. It left Yamal on Feb. 5 and arrived at Montoir on Feb. 15, when it did an STS with Pearl LNG, according to Kpler data. Pearl LNG is scheduled to discharge at the UK’s 5.6 mtpa Dragon LNG terminal today.

The Yamal LNG-chartered 172,000 m3 Fedor Litke ice-class carrier is still signalling a discharge at Grain on Mar. 6, Kpler data show. The vessel is owned by Greek shipper Dynagas and Chinese firms Sinotrans and China LNG.

Industry participants expect that the UK’s ban on Russian-owned or -carry chartered LNG vessels entering its ports will likely mean affected LNG vessels will be diverted to Europe at least in the near term, given that the benchmark Dutch Title Transfer Facility (TTF) gas hub stands at a premium to Asian LNG prices. The front-month TTF futures contract price settled at $32.54/mmBtu while the May futures contract of the Japan Korea Marker settled at $31.44/mmBtu yesterday.

An increase in demand from Asian LNG buyers that pushed Asian LNG prices above the TTF price could encourage diversions away from the UK to Asia, pushing up charter rates as well. Charter rates have weakened in both the Pacific and Atlantic basins due to lower vessel demand since peaking towards the end of November. The Spark30 Atlantic spot charter rate for a 160,000 m3 vessel was last assessed at minus $1000 a day on Feb. 25, up from its previous assessment by $2,500, based on an assessment by Spark Commodities.

Some market participants suggest that while the ban could provide some support for the shipping market, they fear that the UK’s move could signal tougher sanctions that could end up affecting the energy sector.

The UK said in a fact sheet published on Feb. 25 that the situation the UK faces is “not a question of security of gas supply, but of high gas prices set by international markets.” It said the UK is “in no way dependent on Russian gas supply” unlike other countries in Europe. It said the country has highly diverse supply sources, which include pipelines from the UK and Norway continental shelf, interconnectors with the continent, and three LNG terminals that provide Britain with one of the largest LNG import infrastructures in Europe. It said Russian gas made up less than 4% of total UK gas supply last year. But in terms of LNG, the UK imported 2.39 mt of LNG from Russia last year, which accounted for close to 22% of its total LNG imports of 11.02 mt, Kpler data show.

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