Business / Energy

Russian LNG plant scraps cargo to Asian buyer on payment issues

Published: 24 Aug 2022 - 09:51 am | Last Updated: 24 Aug 2022 - 11:06 am
File image used for presentation only

File image used for presentation only


Russia’s push to consolidate control over its natural gas is beginning to curb supply to customers in Asia, the first tangible example Moscow’s move to nationalize Sakhalin is affecting shipments to the region.

Sakhalin Energy LLC, the new operator set up by Moscow to tighten ownership over the liquefied natural gas facility in Russia’s Far East, scrapped a shipment to at least one North Asian customer due to payment issues as well as delays signing revised contracts, according to traders with knowledge of the matter.

Moscow transferred the ownership of the plant to Russia-based Sakhalin Energy from a Bermuda-based entity on Aug. 19 and customers were asked to commit to new deals and send payments to banks in Moscow from that date. Few buyers have signed the revised contracts, which could threaten the flow of gas to markets including Japan and South Korea, the traders said.

Any disruption to natural gas shipments risks exacerbating a supply crunch gripping Asia, which is grappling with surging power bills and higher inflation. Missed deliveries could cause blackouts this winter in Japan, which is the biggest buyer of Sakhalin gas and typically gets about 9% of its LNG needs from the project.

President Vladimir Putin has been tightening his grip over Russian energy assets, and has also limited flows into Europe in what’s been widely viewed as the use of natural resources as a weapon. Gas prices from Asia to Europe have surged as energy-starved customers rush to ensure supply before the key winter heating season.
Sakhalin Energy didn’t respond to a request for comment.

Despite most details of the revised Sakhalin-2 sales contracts remaining the same, such as price and volume, customers are checking with lawyers and poring over the details before committing to the new entity or paying different banks, traders said. 

Sakhalin Energy earlier this month asked customers to sign LNG purchase agreements with revisions to its name and address, while also requesting that payments be made to Gazprombank JSC. The operator released a tender this week to sell the long-term cargoes into the spot market, with one slated to load on Wednesday, according to documents seen by Bloomberg.

That’s abnormally prompt, and indicates that Sakhalin is desperate to find a new buyer, said a trader who received the tender. Companies are unable to participate in the sale without signing revised purchase agreements, according to the documents seen by Bloomberg.