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EU Moves to Sanction Russian LNG

EU Moves to Sanction Russian LNG

May 8, 2024

EU Moves to Sanction Russian LNG

Politico has reported that the European Commission has proposed a new set of sanctions targeting the Russian LNG sector.

Despite existing sanctions on imported natural gas, Europe has continued to import significant volumes of LNG from Russia in 2023. The newly proposed sanctions aim to prevent EU countries from re-exporting Russian LNG after receipt and to ban all EU involvement in future Russian LNG projects.

One of the key elements of the proposal is the prohibition of using EU ports, financial services, and other services to facilitate the re-export of Russian LNG. This would require Russia to significantly alter its current LNG export strategies, as the country often relies on European hubs in Spain, Belgium, and France to supply LNG to the Asian market.

Laura Page, a gas expert at Kpler data analytics firm, highlighted the potential impact of these measures, stating, "If they can't transship in Europe, they might have to take their ice-class tankers on longer journeys," which could potentially reduce the frequency of loadings from Russia's Yamal LNG project due to longer transit times.

Norway and the U.S. have now overtaken Russia as Europe's principal gas suppliers, with Norway contributing 30.3% and the U.S. 19.4% of Europe's total gas imports last year.

In the broader energy market, natural gas prices have recently surged, with Henry Hub prices experiencing significant fluctuations amidst geopolitical tensions in the Middle East and Europe's determination to distance itself further from Russian gas. The situation is compounded by Israel's military actions in Gaza and an expected downturn in Australian LNG exports due to maintenance issues at Chevron Corp’s Gorgon plant.

The future of natural gas prices remains uncertain, as Europe has entered the spring with record levels of gas in storage. While a recent cold snap interrupted the injection season, analysts anticipate that Europe's gas stores will reach capacity with only minor delays.

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