RUSSIA'S LNG FOR EUROPE
PLATTS - LNG produced from Russia's Yamal LNG project look set to stay in Europe in the short term on the back of high European natural gas hub pricing allied to firmer shipping rates due to tight Atlantic tonnage, an analysis by S&P Global Platts Analytics showed.
The key NBP October contract broke above the $10/MMBtu mark on Monday, the first time the rolling month-ahead contract had done so since March 2014, Platts data showed, slightly more than $1/MMBtu below the JKM November period.
Atlantic basin spot shipping rates jumped at the end of last week, rising to $110,000/day in the Atlantic, as assessed by Platts, having been at $45,000/day this summer, making transporting LNG volumes from Europe to Asian markets much more expensive for players without sunk shipping costs.
That was the highest the Atlantic shipping rate has been assessed since it hit similar levels in September 2013.
With rates that high, delivery costs into Northeast Asia from Northwest Europe transshipment or reload ports have been hovering around the $3.50/MMBtu mark.
Yamal project vessels are also unable to deliver further than the Spanish port of Bilbao when the North Sea Route is closed in the winter, increasing the likelihood that cargoes could remain in Europe.
However, Yamal volumes could face competition from other Atlantic production for as long as the arbitrage to Northeast Asia remains closed.
At current shipping rates, the netback for deliveries from Nigeria into the UK's NBP November contract stood at $9.341/MMBtu, while the netback against November JKM was $8.30/MMBtu, making deliveries into Northwest Europe more attractive.
YAMAL LNG PRODUCTION SET TO RISE FURTHER
The first two 5.5 million mt/year LNG trains at the Yamal LNG project are running at 100% capacity, with Train 3 slated to become operational by the end of the year.
Indeed, in late August, a total of 4 million mt of LNG had already been exported from the facility, which came online last December.
So far, a total of 59 LNG tankers from Yamal have either dropped volume into Europe or been transshipped, with only three having taken the northern route to China.
With the northern route now closed due to the ice thickening as winter approaches, Yamal LNG volumes will have to be moved to Europe before potentially being moved elsewhere by being transshipped from the ice-breaker vessels onto standard LNG tankers.
That seemed less and less likely given the narrow spreads between the JKM and the European hubs in addition to tight tonnage causing shipping rates to increase, boosting the regasification option into the European grids.
Platts Analytics showed five Yamal LNG cargoes on ice-breaker vessels heading towards Northwest European terminals within the next two weeks, with three of those expected to berth in France.
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