Russia: a dark LNG fleet to circumvent Western sanctions

Russia could develop a "dark LNG fleet" to transport natural gas in the face of Western sanctions, according to Flex LNG.

Share:

Flotte Sombre GNL Russie

Gain full professional access to energynews.pro from 4.90$/month.
Designed for decision-makers, with no long-term commitment.

Over 30,000 articles published since 2021.
150 new market analyses every week to decode global energy trends.

Monthly Digital PRO PASS

Immediate Access
4.90$/month*

No commitment – cancel anytime, activation in 2 minutes.

*Special launch offer: 1st month at the indicated price, then 14.90 $/month, no long-term commitment.

Annual Digital PRO Pass

Full Annual Access
99$/year*

To access all of energynews.pro without any limits

*Introductory annual price for year one, automatically renewed at 149.00 $/year from the second year.

Russia could use a fleet of LNG ships to circumvent Western sanctions, inspired by its own methods for transporting crude oil and petroleum products. Flex LNG pointed out that current sanctions on Russian LNG transport are limited, but that the US and UK have sanctioned Novatek’s Arctic LNG 2 project, with a planned production capacity of 19.8 million tons per year. The EU (European Union) is considering similar measures to restrict re-exports of Russian LNG from its ports. Developers of the Arctic LNG 2 project initially planned to build around 21 Arc7 ice-breaking LNG carriers to operate in icy conditions. However, the construction of these vessels has been hampered by sanctions, delaying the start of LNG production planned in phases between 2023 and 2026. Flex LNG suggests that Novatek could use existing vessels to meet export needs.

Demand for LNG ships

Currently, around 15 ice-breaking LNG vessels are serving Novatek’s Yamal LNG project. One potential scenario is that these vessels also carry Arctic LNG 2 cargoes to non-ice-covered waters for transshipment to conventional vessels. This would increase demand for LNG carriers, especially if the sanctions proposed by the EU are approved. Transactions on the second-hand market for old ships with opaque companies have intensified. Flex CEO Oystein Kalleklev said:

“This could potentially be the beginning of our dark LNG fleet…. They’ll have to do more ship-to-ship transfers.”

Little-known companies based in Vietnam, China and the United Arab Emirates have recently purchased older vessels, some at high prices.

Consequences of sanctions and dark fleet activity

Second-hand sales have multiplied as Russia has accumulated a large number of tankers via shell companies or in coordination with opaque companies since its invasion of Ukraine in February 2022. This strategy is designed to circumvent the Western oil embargo and the G7 price cap. A joint study by S&P Global Commodity Insights and S&P Global Market Intelligence revealed that 591 tankers had violated or were at risk of violating the sanctions, representing just over 10% of the world’s commercial fleet. Oystein Kalleklev warned that Russia plans to replicate this strategy for LNG. This warning comes as the EU discusses its 14th package of sanctions against Moscow, which could include measures to restrict re-exports of Russian LNG from EU ports.

Impact on markets and logistics

EU purchases of Russian gas and LNG have fallen from 155 billion cubic meters in 2021 to 80 billion in 2022, and just 43 billion last year. Although there is no EU-wide ban on Russian imports for the time being, member states will be able to decide individually to limit import levels.
Even if the EU drastically reduces its purchases of Russian LNG, cargoes will flow to willing buyers in Brazil, India, China and South Africa, resulting in longer shipping distances. This could increase ton-mile demand. Platts valued the rental rate for a Tri-Fuel Diesel Electric LNG carrier in the Atlantic at $36,500/day, and the rates for two-stroke carriers at $47,500/day on May 23.

The Voskhod and Zarya vessels, targeted by Western sanctions, departed China’s Beihai terminal after potentially offloading liquefied natural gas from the Arctic LNG 2 project.
ADNOC Gas will join the FTSE Emerging Index on September 22, potentially unlocking up to $250mn in liquidity, according to market projections.
Norwegian company BlueNord has revised downward its production forecasts for the Tyra gas field for the third quarter, following unplanned outages and more impactful maintenance than anticipated.
Monkey Island LNG adopts ConocoPhillips' Optimized Cascade® process for its 26 MTPA terminal in Louisiana, establishing a technology partnership focused on operational efficiency and competitive gas export pricing.
NextDecade has signed a liquefied natural gas supply agreement with EQT for 1.5 million tonnes annually from Rio Grande LNG Train 5, pending a final investment decision.
Sawgrass LNG & Power has renewed its liquefied natural gas supply agreement with state-owned BNECL, consolidating a commercial cooperation that began in 2016.
Gazprom and China National Petroleum Corporation have signed a binding memorandum to build the Power of Siberia 2 pipeline, set to deliver 50 bcm of Russian gas per year to China via Mongolia.
Permex Petroleum signed a $3 million purchase option on oil and gas assets in Texas to support a strategy combining energy production and Bitcoin mining.
Enbridge announces the implementation of two major natural gas transmission projects aimed at strengthening regional supply and supporting the LNG market.
Commonwealth LNG’s Louisiana liquefied natural gas project clears a decisive regulatory step with final approval from the U.S. Department of Energy for exports to non-free trade agreement countries.
The Indonesian government confirmed the delivery of nine to ten liquefied natural gas cargoes for domestic demand in September, without affecting long-term export commitments.
The Egyptian government signs four exploration agreements for ten gas wells, allocating $343mn to limit the impact of the rapid decline in national production.
Hungary has imported over 5 billion cubic metres of Russian natural gas since January via TurkStream, under its long-term agreements with Gazprom, thereby supporting its national energy infrastructure.
U.S. regulators have approved two major milestones for Rio Grande LNG and Commonwealth LNG, clarifying their investment decision timelines and reinforcing the country’s role in expanding global liquefaction capacity.
Hokkaido Gas is adjusting its liquefied natural gas procurement strategy with a multi-year tender and a long-term agreement, leveraging Ishikari’s capacity and price references used in the Asian market. —
Korea Gas Corporation commits to 3.3 mtpa of US LNG from 2028 for ten years, complementing new contracts to cover expired volumes and diversify supply sources and price indexation.
Petrobangla plans to sign a memorandum with Saudi Aramco to secure liquefied natural gas deliveries under a formal agreement, following a similar deal recently concluded with the Sultanate of Oman.
CTCI strengthens its position in Taiwan with a new EPC contract for a regasification unit at the Kaohsiung LNG terminal, with a capacity of 1,600 tonnes per hour.
Exxon Mobil forecasts sustained growth in global natural gas demand by 2050, driven by industrial use and rising energy needs in developing economies.
Capstone Green Energy received a 5.8-megawatt order for its natural gas microturbines, to be deployed across multiple food production facilities in Mexico through regional distributor DTC Machinery.

Log in to read this article

You'll also have access to a selection of our best content.