Russia reduced LNG exports to world markets in July
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Russian LNG exports to world markets fell by 11.2% yoy in July to around 2 million tons due to scheduled repairs at key LNG plants Yamal LNG and Sakhalin-2. Repair work was scaled back last year as exporters wanted to take advantage of extremely high prices. The decline in exports in July led to the fact that the total volume of supplies for January-July began to lag behind last year, falling by 3.5% to 18.46 million tons. According to analysts, in August we should also expect a decrease in exports due to the continuation of technical work.
In July, Russia reduced LNG exports by 11.2% yoy to 2 million tonnes. Of this volume, 0.93 million tons of LNG were shipped to Asia, 0.88 million tons to Europe, another 0.29 million tons follow without specifying the point of shipment or have not yet arrived at the recipient’s ports, according to Kpler data. In January-July, LNG exports from Russia decreased by 3.5% compared to last year, to 18.46 million tons, of which 9.48 million tons were exported to Europe, another 0.5 million tons went to Turkey.
Most of the exports from the Russian Federation are provided by the Yamal LNG plant of NOVATEK, as well as Sakhalin-2 of Gazprom, which is completely focused on the Asian market. Smaller deliveries come from Gazprom’s medium-tonnage Port LNG project, which was loaded in excess of its nominal capacity last month, and Cryogas-Vysotsk (a joint venture between NOVATEK and Gazprombank). Shipments are expected to begin in the first quarter of 2024 from NOVATEK’s Arctic LNG-2 project, the first line of which is now sailing by sea for installation on the Gydan Peninsula.
The reduction in exports is due to the planned technological maintenance of liquefaction lines. In June, one of the lines of the Yamal LNG plant was stopped for repairs, in August another line went for maintenance. Since July, scheduled repairs have also begun on Sakhalin-2. Last year, when gas prices in Europe hit historical records, Russian LNG plants minimized the time of technical shutdowns.
In 2022, the Russian Federation reduced pipeline supplies to Europe to minimum levels, but at the same time, LNG shipments to the continent increased by more than 30%. Due to increased purchases of all free volumes of LNG from the world market, Europe compensates for the loss of Russian pipeline supplies. At the same time, the European Commission urged the EU countries to reduce purchases of Russian LNG and not to renew long-term contracts for Russian volumes, however, specific restrictive sanctions on LNG from Russia have not yet followed.
Independent expert Alexander Sobko believes that due to technological shutdowns at LNG plants, a decrease in export volumes can be expected in August as well. “But you need to understand that in 2022, Gazprom’s Port LNG plant at 1.5 million tons per year was not yet operating in the summer months, but now it compensates for part of the drop in exports due to scheduled repairs when compared year-to-year” the analyst notes.
Ivan Timonin from the Implementa company notes that shipments from Sakhalin-2 will resume on August 10, and the third line of Yamal LNG will also be closed from August 1 to 21. Thus, out of 2.5 million tons of production capacity in Russia in monthly terms, only 1.9 million tons will actually be available, he concludes.
Profit margins on LNG sales remain strong in all key markets, the analyst adds. Thus, the cost of supplies from Yamal LNG when exporting to Europe, according to his estimates, is at the level of $5.5 per MMBtu, to Asia – $6.8 per MMBtu, from Sakhalin-2 to Asia – about $5 per MMBtu, while oil-pegged LNG prices are $12.6 and $13.1 per MMBtu in Europe and Asia, respectively.
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