Although sanctions pressure continues to increase against liquefied natural gas (LNG) projects in Russia, export volumes have managed to break records. According to Kpler, LNG exports reached a record-breaking figure of 2.94 million tonnes, marking a 33% increase compared to August 2023.
There are several factors that can explain this growth despite the pressure exerted on the Arctic LNG 2 project and the ban on LNG transshipment. Notably, the volumes increased due to shipments to both Europe and Asia.
Firstly, despite the rhetoric against Russian LNG in Europe, there are currently not many alternatives. The overall trend for LNG imports has decreased and has actually reached its minimum since 2021—230.9 million cubic metres a day—but EU countries still cannot and will not give up Russian natural gas.
The demand for Russian LNG continued to increase this summer, as the US preferred Asian markets for its LNG, thereby increasing demand in Europe.
A bit of background: in spring 2024, the Agency for the Cooperation of Energy Regulators confirmed that completely cancelling gas imports could cause an energy shock. At that point, Russia’s share of the European gas market surpassed that of the US, ranking second after Norway.
Another point that demonstrates that both European countries and Russia still prefer to maintain the status quo where possible is the situation with carriers’ maintenance. This does not fall under the sanctions package. According to research by High North News, LNG carriers continued to use docks in France and Denmark, which kept “Russia's LNG fleet afloat”. Recently, it was said that Denmark restricted 27 Russian oil tankers from entering its ports..
High export volumes can also be partially explained by technical factors. During the summer of 2023, a major portion of Russian LNG infrastructure was undergoing renovation. Nevertheless, there is also a significant increase in the number of importers: EU countries purchased approximately 1 million tonnes of LNG this year (Greece—for the first time since January), reflecting an increase of 57%, while 1.62 million tonnes were shipped to Asian countries, with a yearly increase of 10.5%.
The ‘shadow fleet’ has also possibly contributed to this summer’s figures, although it is difficult and too early to estimate the amounts that can be shipped using shadow LNG carriers. This topic still remains quite shaky, as there is no official information concerning the fleet. The original guess by Bloomberg and further research on the topic by CREA, El Economista and High North News still face one fact—without certain demand in Europe there wouldn’t be a fleet.
It is worth noting that the global LNG market is currently very fragile and fragmented. According to experts, any change in the balance of supply and demand, such as an emergency event at any large LNG project, may cause a sudden change in resource prices. The factor currently affecting most LNG shipments globally is the danger of Houthi attacks in the Red Sea and, consequently, new routes that effectively split the markets.
The Arctic Century wrote about how these attacks also influenced the situation with coal, possibly further diversifying the export structure of the Northern Sea Route: Russian Coal Turns to the NSR, But Will It Stay in the Route’s Export Structure?
The Editorial Board of the Arctic Century
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