Russia’s LNG Impact Over Europe

Russia import LNG portfolio in Europe via pipeline through Poland Yamal-EuroPol pipeline and Austria Baumgarten gas hub.

In February Russian LNG has played a crucial role in pricing in Europe. Many analysts have stated the increased dependence of Russian LNG imports combined with a weak Asian demand and a warmer winter temperature, and the start of the anticipated Yamal LNG project.

The Yamal LNG project is a $27 billion joint venture between Novatek, Total, CNPC and The Silk Road Fund, the operations started earlier with the first cargo sipped on December 11, 2017 sold on a spot basis in the markets with the highest net back, which is currently Europe according to mark Gyetvay (CFO, Novatek PJSC).

Most of the cargo have been shipped to Northwest Europe this winter, it has become the main source of European LNG imports. It allows supply flexibility and gas price cap observed throughout Europe. The dynamic is due to the Asian gas market which is the largest consumer of LNG. Last year Asian buyers secured enough supplies ahead of the winter.

Even though Asian market has been less in demand this past month they are still the largest consumers in the LNG space. We are still going to see an anticipated higher demand from India and other Asian nations.

The three Yamal trains should be online by April 2020 at the time the contract will be in effect. LNG plants usually market their production before the long-term deals begin, by short-term market in order to gain additional returns on investment. It is anticipated a substantial amount of LNG cargoes should drop out of the spot market by April 2020.

It will be difficult to gain a comprehensive understanding of the identity of the Yamal cargo-end users. Due to the majority of the Yamal’s contracts counterparts simultaneously operates across numerous supply contracts and short-term gas and LNG market