Russia’s Pivot to Asian LNG Exports Doubles Costs, Cuts Revenue
Impact of Russia’s LNG Export Shift to Asia
By Oksana Kobzeva
MOSCOW, May 18 (Reuters) - Russia's diversification of its liquefied natural gas exports to Asia after the loss of the European market will cut its revenue due to at least a doubling of logistics costs, industry sources and analysts told Reuters.
The European Union plans to fully phase out Russian LNG imports from the beginning of 2027 as part of its sanctions pressure on Moscow over the war with Ukraine.
Challenges in Redirecting LNG Exports
In an attempt to regain the initiative, President Vladimir Putin said early in March that Russia could stop gas supplies to Europe with immediate effect and seek longer-term commitments from other buyers.
But that so far has proved challenging.
Sanctions and Market Response
Industry sources told Reuters that India refused to buy a cargo from Russia's U.S.-sanctioned plant. One industry source said Russian LNG may have proved too expensive once transport costs and sanctions-related complications were factored in.
Comparing Export Routes and Costs
A trip from Yamal LNG on the Arctic Yamal peninsula to Europe takes around 17 to 20 days, compared with much longer routes to Asia: 50 to 60 days via the Suez Canal, 70 to 80 days via the Cape of Good Hope, and 50 to 65 days via the Northern Sea Route (NSR) across Russia's Arctic shores.
Transport costs from the plant to a port in Europe average $1 to $1.5 per million British thermal units (mmBtu) to northwest Europe and $2.5 to $5 to India, or around $3 on average, said Alexei Belogoryev, a research director at the Institute for Energy and Finance in Moscow.
Northern Sea Route and Other Export Options
Northern Sea Route Too Costly
NORTHERN SEA ROUTE TOO COSTLY
The Suez Canal currently offers the lowest-cost route for Russian LNG, although it carries security risks, analysts say.
Year-Round Delivery Considerations
"For year-round deliveries to India, this is the most optimal option," said Alexander Buyanov, deputy head of the Moscow-based Central Research Institute of the Maritime Fleet.
Limitations of the Northern Sea Route
By contrast, the Northern Sea Route — a key focus of Russia's transport strategy — is the most expensive option for shipments to South Asia and complicated by a shortage of ice-class tankers, according to analysts.
The institute estimates show transport costs from Yamal to India's Kochi port exceed $187 per ton (about $3.8 per mmBtu) via the Northern Sea Route when using Arc7-type ice-class tankers.
Cost-Saving Alternatives
Combining the Northern Sea Route with trans-shipment via Russia's far eastern Kamchatka peninsula cuts costs to $163 per ton (about $3.3 per mmBtu) and reduces tanker demand to 27 from 50.
The cheapest option is via the Suez Canal with trans-shipment in Murmansk using Arc7 and Arc4 vessels, at $128.3 to $132.9 per ton ($2.6 to $2.7 per mmBtu).
(Reporting by Oksana Kobzeva; Writing by Vladimir Soldatkin; Editing by Hugh Lawson)
