The European Commission proposed this week a new sanctions package on Russia, which for the first time targets LNG. The proposal is now with the Member States and should be decided in the coming weeks.
The proposed sanctions have three main axis:
(1) Ban on LNG transhipments via the EU to other markets (primarily Asia). Novatek has long-term transhipment contracts at Zeebrugge and Montoir. almost 30% of Yamal LNG production was transshipped at those facilities in 4M 2024. Ban on transhipments would increase significantly routes for Yamal LNG and could lead to shipping contraints (due to limited availability of Arc7 LNG carriers). A potential way to mitigate this is via ship-to-ship transfers in open waters (which is logistically more challenging);
(2) Ban on LNG imports to EU terminals not connected to the EU grid: small-scale, offgrid terminals would fall in that category. Malta LNG and El Musel could also potentially be impacted, as they are not connected to the broader EU grid. Novatek could mitigate this by diverting LNG deliveries to large-scale terminals not impacted by these restrictions;
(3) No new investment and technology access restrictions for Russian LNG terminals under development: this has been broadly covered in previous sanction rounds, but tightening rules could further delay Russian LNG projects and increase their reliance on Chinese financing/technology.
Source: Greg Molnar (LinkedIn)
