More Russian LNG could flow to Asia despite shipping restrictions once the European Commission’s proposed advancement of a ban on Russian LNG takes effect at the start of 2027, market sources and analysts said.
The EC’s ban on Russian LNG from the start of 2027 was part of its proposed 19th package of sanctions against Moscow Sept. 19.
The sanctions package will now be put to EU member states for discussion and would need unanimous agreement to win approval.
The move comes as the European Council is separately moving forward with a proposal from the EC to ban Russian gas, LNG and oil imports by the end of 2027. The effort is “well advanced” with the aim to have the legislation adopted by the end of this year, an EC spokesperson said Sept. 24.
“The EU regulation phasing out Russian energy is likely to be adopted in the fourth quarter of 2025,” said Laurent Ruseckas, executive director for First Take Gas, Geopolitics & Finance, at S&P Global Commodity Insights.
“This will have almost immediate impact as 10 Bcm of annual LNG volumes currently being sold into the EU on a spot or short-term basis will be phased out very quickly – perhaps as soon as by April 2026.”
“The other half of Yamal LNG flows to the EU (considered “long-term contracted” volumes) would be phased out at end-2027 under the Regulation; or end-2026 based on new language added last week to the EU’s 19th package of sanctions against Russia,” Ruseckas added.
Sanctions implications
Daisuke Harada, director general of the Department of Research and Analysis at the Japan Organization for Metals and Energy Security, said it is possible to see some type of exception for long-term LNG contracts or certain pipeline gas supply-dependent countries.
“If that happens, it may not be a complete sanction and could become ineffective,” Harada said.
“If it is realized in a way that breaks long-term contracts, the penalty for take-or-pay agreements will also come into discussion.”
“If those conditions are met, Yamal LNG will naturally seek alternative markets in Asia,” he said, adding that there will be shipping restrictions because the Murmansk transshipment terminal in Russia cannot be used because of its Specially Designated Nationals status.
“There are restrictions on STS (ship-to-ship) transshipment, it will be forced to transport using inefficient 14 icebreakers, or it may look for opportunities for STS in the Mediterranean, etc,” he added.
Ships carrying Yamal LNG cargoes to Asia will likely discharge them at Kamchatka, via STS, a few Southeast Asia sources said.
“The situation is very complex now, as Yamal LNG has many long-term contracts with European buyers,” said a chartering executive at a global commodities trading firm.
The 17.4 million mt/year Yamal LNG project in northern Russia, which is not currently sanctioned, exports most of its deliveries in Europe, with outlets in China, Taiwan Area ,China and South Korea.
An EU ban on the transshipment of Russian LNG at EU ports took effect in March, leading to some transshipments taking place instead at Murmansk in northern Russia for onward delivery to Asian markets.
Shipping restrictions
“There are three legs of the voyage where it faces restrictions – the Arctic leg that requires Arc 7 ice-class LNG carriers, the transshipment leg where it needs a suitable onshore or offshore location to transfer the cargo to a conventional LNG carrier and the southbound voyage where it mainly needs more conventional LNG carriers,” said Eric Yep, senior principal analyst for First Take Gas at Commodity Insights.
“The lack of Arc7 tankers constrains the first leg significantly, but adding to shipping length for the southbound voyages is not so difficult as the sale and purchase market is booming and many LNG carriers have already moved to independent registrations and holding companies.”
“Our study in August, before the ban was advanced by a year, expects that Yamal LNG’s shipping length would expand to 35 to 68 tankers for a full voyage around the Cape to Asia, from just 18-29 tankers in its current Europe-focused market,” Yep added.
Yamal LNG’s utilization could fall by as much as 40% if the project is unable to expand its fleet, Yep said, referring to the same study.
Market views
Market sources in Asia said that Yamal LNG could find homes in Asia should the supply be price-competitive and the shipping fleet be sufficiently available.
“China’s appetite for Yamal cargoes ultimately is subject to price,” said an East China market source. “Unless the cargo is significantly discounted from JKM, flows might not increase that much.”
An Indian gas utility source said that Indian buyers could buy Yamal LNG cargoes “if they are offered but financing is getting tougher to source.”
“Price will be competitive as it would be sort of distress quantity,” the source said.
“But still most of the companies are not aware how to deal For LNG financing apart from the state-owned oil companies.”
Two Japanese buyers of Russia’s Sakhalin 2 LNG also do not rule out a possibility of taking Yamal LNG cargoes should the supply meet such conditions as supply stability, price, flexibility and international situations, company sources said.
The move by the EU also comes at a time when there is an increasing inflow of Russian LNG into Asia, where sanctioned Russian LNG carriers have discharged cargoes from the Arctic LNG 2 six times at the Tieshan terminal in the Port of Beihai, southern China, in recent weeks.
Source: Platts
