why Brussels wants to sanction the transit of Russian LNG in European ports

why Brussels wants to sanction the transit of Russian LNG in European ports
why Brussels wants to sanction the transit of Russian LNG in European ports

This is a first since Moscow’s invasion of Ukraine in February 2022: the Twenty-Seven are finally considering targeting Russian gas as part of a fourteenth package of sanctions. And more precisely liquefied natural gas (LNG), notably from the Yamal plant in the Russian Arctic Circle and transported by sea to European coasts, according to a provisional proposal from the European Commission.

The talks are nevertheless only at their beginning, and these reprisals would only concern a small part of the LNG sent to the Old Continent: that which transits there before leaving for third countries aboard other ships, notably in China or Turkey. But in concrete terms, what purpose do these transshipment operations serve, and what loss of revenue would their ban generate not only for Moscow but also for the European companies which are now benefiting from them? To see more clearly, The gallery make the point.

What sanctions are proposed?

In a provisional text, the European Commission proposes to prohibit a very specific aspect in the business lucrative Source of Russian gas deliveries: ship-to-ship transshipments carried out in European Union ports, with a view to redirecting LNG to third countries. The principle: guarantee that the facilities of the Old Continent are not used for this purpose.

And for good reason, some of the LNG cargoes that are today sent to Europe do not stay there, but transit before leaving, after changing boats, towards other regions of the world. And in particular gas from Novatek’s Siberian Yamal LNG plant (of which TotalEnergies still holds more than 20%), which has a fleet of 15 ice-breaking LNG carriers specially designed and built to transport LNG to Europe ( and, when the sea ice melts in summer, towards Asia). Result: last year, according to the CREA (Center for Research on Energy and Clean Air), of the approximately 20 billion cubic meters of Russian LNG received in Europe, 6 billion (or 30%) were transhipped in the bloc’s ports, including 4.4 billion m3 (22%) to countries outside the EU – notably China, Japan and Bangladesh – and 1.6 billion (8%) to other EU states.

By extension, the Brussels executive would also prohibit “ to provide, directly or indirectly, technical assistance » and other services – ship supply, crew change, towing services – « for the benefit of a ship transporting LNG originating in Russia to a third country », proposes the Commission. However, at present, transshipment is only illegal in the United Kingdom and the Netherlands.

Read alsoLNG: four questions to understand its climate impact

Why are transshipments so important for Moscow?

If Russia practices transshipment, it is because these operations allow it to have an international outlet for its LNG production, more quickly and less expensively than if these stops did not exist. Indeed, its icebreaker ships, designed for the Arctic maritime routes of Siberia, can unload their cargo directly into smaller boats more suited to global trade routes. These conventional LNG carriers thus filled with gas then head towards the end customers, freeing the immense Russian icebreakers, slow, rare and expensive, to immediately redirect towards the north…and so on.

On the Old Continent, Belgium, France, the Netherlands and Spain are the main transit points. According to a study by the German environmental NGO Urgewald, the Belgian port of Zeebrugge and the French LNG terminal of Montoir-de-Bretagne (port of Nantes) constitute crucial hubs for the shipment of Russian LNG to China, Taiwan and even Turkey. Brussels’ idea would therefore be to curb this lucrative trade, by restricting Russia’s ability to transport its gas around the world.

What would be the revenue losses for Russia?

It seems difficult to say with certainty what the financial impact of such sanctions on Moscow would be. Concretely, last year, the cost of Russian LNG sent to European coasts (including for transshipment) amounted to 8.2 billion euros, according to CREA estimates. Using the previous figures, the losses for Russia due to the ban on using EU ports would therefore theoretically amount to 1.8 billion euros for cargo sent outside the EU, and 2.5 billion euros for all countries (including the EU). The impact could be even greater as ships around the world are already avoiding the Red Sea after attacks by Yemen’s Houthis, forcing them to bypass Africa.

Still, Russia has other options: It conducts ship-to-ship transfers near its port of Murmansk, north of the Arctic Circle, which could be used to free up more ships. Moreover, in summer, when the ice melts, Russia can also use the Northern Sea Route. Overall, new sanctions will probably not stop exports, but they will have to be reloaded elsewhere, which could cause discontent among the Chinese and India, the main buyers.

Would European companies that profit from these transshipments be penalized?

Within the EU, three ports are mainly used by Russian ships to transship gas: Bilbao in Spain, Montoir-de-Bretagne in France, and Zeebrugge in Belgium, which have infrastructure allowing direct transfer of LNG from ‘one ship to another. According to the hypotheses of the IEEFA think tank (Institute for Energy Economics and Financial Analysis) based on data from the consulting firm Kpler, the Belgian port of Zeebrugge transshipped nearly 2 billion cubic meters (Gm3) of Russian LNG in the first quarter of 2023, and the French terminal of Montoir-de-Bretagne 0, 3 Gm3. And the companies that manage this transit include the Spanish Naturgy, the French Elengy and the Belgian Fluxys, which act as service providers for Yamal LNG, via long-term contracts.

Elengy was also the first operator in the world to carry out such a transshipment, in 2013. Two years later, the company validated an investment of 65 million euros to allow Siberian icebreaking LNG carriers to transship as quickly as possible. their cargo. Purpose of the operation: to completely renovate two wharves, adapt the equipment and increase the flow rate of the pumps, to reduce the stopover time from 48 to 24 hours, so that the icebreakers leave as quickly as possible towards the Yamal liquefaction plant.

The same year, Elengy signed a 23-year agreement with Novatek, covering one million tonnes of LNG transhipped per year at Montoir (i.e. 14 annual cargoes), a contract taken over by TotalEnergies in 2018. When questioned, the company did not However, it does not communicate on the revenues from these services, which probably generate significant margins, nor on the impacts of possible sanctions on its activities.

Read alsoWhy TotalEnergies is not selling its assets in Russia

Last year, however, it was another European port which transhipped 70% of Russian LNG, according to the Flemish NGO Bond Beter Leefmilieu: that of Zeebrugge. Around 90% of Yamal LNG transhipped in Zeebrugge since 2021 has been shipped to third countries, according to Kpler experts. The Belgian equivalent of Elengy, Fluxys, thus receives around 50 million euros per year thanks to an agreement with Yamal LNG which expires in 2039, confirms The gallery a company spokesperson.

It also remains to be seen whether or not European Union sanctions would allow these companies to unilaterally terminate their contracts without exposing themselves to sanctions or legal action from their Russian partners, citing a case of “force majeure”.

Would the sanctions also attack the consumption of Russian LNG in Europe?

Beyond these transshipments, however, there would be no question of banning or restricting imports of Russian LNG into the EU. However, according to the IEEFA, LNG imports represented around 37% of Europe’s gas consumption in 2023, compared to 34% in 2022. According to this same institute, from January 2022 to December 2023, the EU has paid around 23.8 billion euros for LNG from Russia. And even though France no longer relies on pipeline shipments, its imports of liquefied natural gas transported by ship from Russia increased by 41% between January and September 2023 compared to the same period in 2021.

Furthermore, to transport the famous fuel to the four corners of the world, France continues to add new LNG import capacities, in order to receive it on its coasts. This is evidenced by the commissioning of the TotalEnergies floating LNG terminal on October 26 at the port of Le Havre (Seine-Maritime). Named Cape-Ann, this factory ship will receive LNG brought by other ships, before heating it to inject it into the land gas transport network.

Once operational, it will add 5 billion cubic meters of import capacity to France. To which will also be added an additional 2 billion cubic meters by 2030 due to the extension of one of the LNG terminals operated by Elengy, Fos Cavaous in Fos-sur-Mer (Bouches-du-Rhône). . whose capacity has already increased by 5 bcm since the start of 2022.

The movement is such that, from now on, French LNG flows exceed imports by pipeline, despite the greater carbon impact of the latter linked to the liquefaction, transport, and regasification of this fuel. Indeed, while 266 terawatt hours (TWh) of gas were transported by pipes in 2022 (compared to 526 TWh in 2014), this figure rose to 369 TWh for LNG, according to the IEEFA.

Read alsoLNG: the way is clear for the Le Havre LNG terminal

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