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“One if by Land, Two if by Sea:” Boston buys Russian LNG

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January 9, 2018 – Fort Russ News –

– Yuri Barsukov in Kommersant.ru, translated by Tom Winter –

Boston, and the Old North Church of legend.

The long-standing dream of exporting Russian liquefied gas to the US could become reality in January – though not the way Gazprom was planning in 2005. The French company Engie will deliver a LNG cargo to Boston from the UK, which was actually came  from the Yamal LNG project of NOVATEK. 

The reason for such a strange deal is the sharp rise in gas prices on the eastern coast of the United States. Because of the recent snow storm [on the US east coast] gas prices went up to an unprecedented $ 6.3 thousand per thousand cubic meters. However, the deal is unlikely to result in a trend and its fulfillment only indicates that the gas market is becoming truly global.

Gaseli’s LNG-tanker, owned by Engie, is carrying a cargo of liquefied gas from the British terminal Isle of Grain to the Everett re-gasification terminal, located near Boston. This comes from the marine vessel monitoring system MarineTraffic. 

Gaselys stood loading at Isle of Grain immediately after the tanker Christophe de Margerie was unloaded there with the first cargo from NOVATEK’s plant in Yamal, and, according to several Kommersant interviewees among the traders, Gaselys is transporting gas of exactly Russian origin to the United States.

However, the owner of the gas when shipping to Sabetta was the Malaysian company Petronas, and then it was resold, perhaps several times. The fact that the final buyer was Engie, is due to the fact that the company has a reserved capacity for regasification in the Everett terminal at 6.9 billion cubic meters per year. The tanker should arrive in Boston on January 22nd.

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This delivery completely contradicts the American market development strategy of becoming a major LNG exporter, and regasification terminals are being rebuilt into gas liquefaction terminals. According to the US Customs, the cargo of Gaselys is the first import lot that will come to Everett since 2014. The current situation is due to extreme weather conditions on the east coast – cold weather and a snow storm. Against this backdrop, spot prices at the main Henry Hub site from December 28 to January 5 soared 2.1 times to $ 6.4 per MBTU, while at the entrance to the New York City network the price rose to an incredible $ 175 per MBTU (about $ 6, 3 thousand for 1 thousand cubic meters).

However, on January 8, prices in New York fell to $ 12.65 per MBTU, in New England – to $ 20.25, but these levels are still very attractive for LNG, which is now even on the premium Asian spot market is about $ 11 per MBTU.

High prices in the northeastern US may persist for some time, as the temperature is forecast to remain below normal, and gas reserves in storage facilities (UGS) are rapidly declining. From January 1 to January 5, 9.5 billion cubic meters of gas was raised from the UGS – an absolute historical record (this is twice as high as in 2017), while the total level of stocks fell to the lowest level since 2009.

“Gazprom is ready to export gas to the United States on a regular basis. It remains only to wait for an acceptable price, and this, I think, is just around the corner” — Alexander Medvedev, Gazprom’s Deputy Chairman of the Board, February 18, 2011.

Deliveries of Russian gas to the US were Gazprom’s long-standing hope, since up to 2007 the fuel deficit in the US market was exacerbated, and it was assumed that the US would soon become the largest LNG importer. Gazprom planned to supply gas to the US from the Shtokman project, which was also favored by a relatively short transport shoulder across the North Atlantic.

However, the shale revolution in the USA put a stop to these plans, and now the country is going to become one of the largest gas exporters.

The supply of Russian gas from Yamal to the US will not become a trend and is just an illustration of the growing globalization of the gas market, says James Henderson of the Oxford Institute for Energy Studies: “This is the essence of LNG – it goes where there is demand.”

 Another interlocutor of Kommersant among traders notes that it is difficult to find free, unregistered volumes in the winter, so transactions with strange geography occur quite often: “When the Norwegian LNG with delivery to Britain or Spain was then reloaded for the Asian market, it never bothered anybody”.

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