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Japan, South Korea buyers not yet asked to pay roubles for Russian LNG imports
Global Banking & Finance Review®
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By Yuka Obayashi and Joyce Lee
(Reuters) – Major Asian buyers of Russian liquefied natural gas (LNG) said they had yet to receive requests to pay for supplies in Russian roubles after a senior manager at gas producer Gazprom floated a proposal to expand the payment scheme.
The proposal came just days after Russia moved to seize operations of the Sakhalin-2 LNG plant in retaliation for Western sanctions, raising supply concerns for top buyers such as Japan and South Korea.
Russia has already demanded rouble payments from European oil and gas buyers as its economy, cut off from the global financial system, faces the gravest crisis since the 1991 collapse of the Soviet Union.
Receiving payments for energy exports in roubles helps Moscow circumvent sanctions and finance its war in Ukraine, which it calls a “special military operation”.
Kirill Polous, a deputy department head at Gazprom, said the Russian gas producer has proposed expanding its rouble-for-gas scheme to cover liquefied natural gas (LNG), the Interfax news agency said, citing the senior manager on Monday.
Spokespersons of Japan’s biggest LNG importer JERA, Japanese utility Kyushu Electric and South Korea’s state run Korea Gas Corp (KOGAS) said the companies had yet to receive a request to pay for LNG supplies in roubles, however.
The Kyushu Electric spokesperson said the company’s LNG contract would have to be revised if there was a change in payment currency.
Another Japanese buyer, Tokyo Gas, declined to comment, citing a confidentiality clause in its Sakhalin-2 LNG agreement, when asked if the city gas supplier has received a request for rouble payment.
A third buyer, Osaka Gas, is gathering information, a spokesperson said.
The companies have long-term contracts with Sakhalin Energy Investment Company, in which Gazprom owns 50%, Shell 27.5%, Mitsui 12.5% and Mitsubishi Corp 10%.
Russia accounts for about 8% of global LNG supply with 40 billion cubic metres of super-cooled gas a year coming mainly from Sakhalin-2 and Novatek’s Yamal LNG, Russia’s largest LNG plant.
Buyers of LNG from the Sakhalin-2 facility include Japanese utilities which are lifting 60% of the output, followed by South Korea’s state run Korea Gas Corp (KOGAS) and Taiwan’s CPC.
Russian supplies account for 6% of South Korea’s LNG imports, the KOGAS spokesperson said.
Taiwan’s Economy Ministry said state-owned refiner CPC’s five-year contract to directly buy LNG from Russia had ended.
The company has already found alternate sources “so there are no rouble purchase or settlement issues involved,” the ministry added. CPC last imported two cargoes from Sakhalin and Yamal that discharged in June, Refinitiv data shows.
Key long-term LNG buyers from the Yamal facility include China’s CNPC, Gazprom Marketing & Trading, Naturgy, Novatek and TotalEnergies.
The proposal should not come as a surprise as the move makes all payments for gas, whether piped or as LNG, chargeable by Gazprom in roubles at its discretion, said Tilak Doshi, the managing director of Doshi Consulting.
“It would seem that the Russian ‘gas for roubles’ scheme was directed primarily at the European Union and United States for their unilateral expropriation of Russian foreign exchange reserves, and not at Asian LNG customers, such as South Korea and Japan, who are important purchasers of Russia’s LNG,” he added.
(Reporting by Joyce Lee in Seoul, Yuka Obayashi in Tokyo and Ben Blanchard in Taipei; Writing by Florence Tan; Editing by Michael Perry and Clarence Fernandez)
Liquefied natural gas (LNG) is natural gas that has been cooled to a liquid state for ease of storage or transport. It takes up about 1/600th the volume of natural gas in its gaseous state.
Roubles are the currency of Russia. It is abbreviated as RUB and is used in various transactions within the country, including energy exports.
Gazprom is a state-owned gas company in Russia, known for being one of the largest producers of natural gas in the world. It plays a significant role in the global energy market.
The Sakhalin-2 LNG plant is a major liquefied natural gas facility located on Sakhalin Island in Russia. It is one of the largest LNG projects in the world and plays a crucial role in Russia's energy exports.
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