First LNG tanker of Russia's Novatek ends up in UK

First LNG tanker of Russia's Novatek ends up in UK
First LNG tanker of Russia's Novatek ends up in UK / wikimedia commons
By bne IntelliNews December 15, 2017

The first shipment of liquefied natural gas (LNG) produced by Russian independent gas producer Novatek ended up in England despite targeting Asian markets, Vedomosti daily and the Financial Times said on December 15.

Novatek's LNG gas being sold to the UK is particularly ironic given the particularly hawkish stance taken by government of Teresa May on Russian allegedly interventionist geopolitics recently.

In addition, Novatek that has been granted a waiver to export LNG, now comes in direct competition with Russian state-run gas giant and pipeline exports monopolist Gazprom that supplies gas to Europe.

Reportedly the fist LNG tanker Christophe de Margerie that left the Sabetta terminal at the Yamal peninsula on December 9 was sold to Malaysian Petronas, which then sold the gas to UK on the spot market.

The spot price on gas spiked on December 12 to a record-high $400 per 1,000 square meters on the UK's National Balancing Point, due to a number of factors, most importantly to the explosion at Austrian gas hub in Baumgarten, a key node in Russia’s western orientated gas pipeline distribution system.

Gazprom supplies gas to EU either on long-term contract or on the spot market. The company had no long-term contracts in the UK, but nevertheless sells over 12bn cubic meters of gas on spot market to the islands.

Previously Gazprom representatives were alarmed that Novatek's LNG will compete with pipeline supplies and analysts surveyed by Vedomosti on the issue agree that there is no guarantee that Russian LNG will not be resold from Asian buyers back to Europe.

This week Novatek unveiled ambitious growth plans at its investor’s day, aiming to achieve compound gas output growth of 5.9% by 2030 and accounting for two thirds of Russia's LNG output.

Having just launched the major Yamal LNG project, Russia’s second LNG plant that was financed despite the Western sanctions, Novatek plans further expansion in the LNG markets, while reiterating the intention to maintain its market share on a stable domestic market.

"We deem the focus on LNG to be a play on global macro, including global growth, with the world transitioning to more ecologically-friendly gas consumption, and LNG prices," VTB Capital commented on December 13 in a report entitled "From domestic gas producer to global LNG player."

"The company remains in the sweet spot of Russia’s oil & gas sector, widely supported by the Russian government, and enjoying the lowest tax burden in the sector and the highest levels of profitability and cash flows," Renaissance Capital wrote on December 13 summing up the Strategy Day takeaways.

 

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