Desperate Britain Forced To Import Russian Gas From Sanction-Targeted Project

Tyler Durden's picture

We said two days ago that it’s been a tough week for anybody who needs to heat their home or put gasoline in their cars in Britain. The litany of negative events and mishaps includes extremely low temperatures, the shutdown of the Forties pipeline due to a hairline crack and an explosion at one of the Europe’s biggest gas hubs in Austria, which further tightened UK supplies.

As we noted, the price of gas futures surged by the most in 8 years. The timing of the gas hub explosion, as we head into Winter, couldn’t have been worse either.

However, adding insult to injury, the UK lacks gas storage capacity and the web of interconnections that link markets across Continental Europe. And…Centrica is closing the nation’s biggest storage site after more than 30 years. The question was, where could the UK secure alternative supplies, as we noted.

It takes about two weeks to bring LNG from Qatar, the U.K.’s biggest supplier of the super-chilled fuel. Only one tanker, the Bu Samra, is confirmed as arriving in the U.K. this month. The first tanker from Russia’s Arctic plant Yamal LNG may also head to Britain and would arrive in about five days, according to shipping website sea-distances.

The photo below shows Russian President, Vladimir Putin, personally giving the order to begin loading the first export shipment of Yamal LNG onto the world’s first icebreaking LNG carrier, the Christophe de Margerie.

The destination of the LNG carrier was expected to be Asia, but will actually be Britain, even though the British government backed US sanctions against the project. Indeed, Novatek, which operates Yamal had to perform “financial gymnastics” after the US Treasury cut it off from western financing in 2014. To overcome this challenge, the company converted the funding of the $27bn project into euros and secured a $12bn loan from Chinese banks. As the Financial Times reports.

British homes are set to be heated over the new year with gas from a Russian project targeted by US sanctions, as the shutdown of a key North Sea pipeline slashes domestic output and sends utilities and traders scrambling for supplies. The first tanker of liquefied natural gas from the Yamal LNG project in Russia’s Arctic, which was opened by President Vladimir Putin last week, is making its way to the Isle of Grain import terminal in Kent as UK gas prices soar.

The shipment of the super-chilled cargo to the UK, which was originally expected to go to Asia, will be cheered in the Kremlin, where the Yamal LNG project has been held up as evidence that it can withstand western sanctions. Moscow has insisted that Europe will remain reliant on Russia for gas. The UK government has taken a tough line on Russian sanctions since Moscow first intervened in Ukraine nearly four years ago, and Theresa May, prime minister, has stepped up criticisms more recently, accusing Moscow of meddling in elections and attempting to “weaponise information” to undermine the west.

As the FT notes, it’s not unusual for the UK to import small volumes of Russian gas by pipelines through other European countries, however, the arrival of the Christophe de Margerie LNG tanker will be the first Russian delivery to arrive by ship. Neither the UK or EU sanctions specifically target Yamal LNG, although they have targeted finance and technology for other Russian energy projects in the wake of Russia’s annexing of Crimea in 2014. The FT quoted an unnamed official close to the Russian energy ministry saying that the UK’s decision to back US sanctions, including ones targeting Yamal LNG, looks like “someone biting the hand that feeds him”. So, given the embarrassing position the UK has found itself in, what is its response? According to the FT.

Britain’s Department of Business, Energy and Industrial Strategy (BEIS), which has argued that gas supplies will still be ample this winter because of the UK’s import capacity, emphasised that 80 per cent of the gas consumed in the UK is domestic or bought from Norway or Qatar. BEIS said that it was up to the market to decide what gas to import. The LNG cargo has been bought by the London-based trading arm of Malaysia’s Petronas, which did not respond to requests for comment. “Whether this liquefied natural gas shipment is eventually consumed in the UK is down to the market,” BEIS said. “But we can only benefit from having a diverse range of supplies.”

So, using a third party gives the UK leeway to say, essentially “It’s not me, Guv’nor”, to use the cockney vernacular.

The FT asked an analyst at the respected Wood Mackenzie consultancy for his opinion.

Frank Harris at Wood Mackenzie, an Edinburgh-based energy consultancy, said that the shipment demonstrated that the UK was now reliant on a market-based import model for its gas supplies. “There’s great flexibility in that model, but ultimately you’re competing with other countries on price for supplies,” Mr Harris said.

Having been loaded last Friday, the Christophe de Margerie is currently sailing past the northern coast of Norway. As commentators are pointing out, it could still be redirected if someone is willing to pay a higher price for its gas. The way the UK’s luck has gone recently, that’s probably a pretty good bet.


 

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LawsofPhysics's picture

LOL indeed!

"Who runs bartertown?"

HRClinton's picture

Vlad runs Mother Barterland.

nuubee's picture

The left will just take this as confirmation that Brexit was a plot by Putin.

shitshitshit's picture

Again Sun Tzu in the text:

If you wait long enough you might see UK floating by the sea...

Bill of Rights's picture

Thats my hopes for California..

shitshitshit's picture

wrong direction my friend, at the moment it's going up in the sky...

HenryKissingerZuckerberg's picture

this only shows politicians who NEVER have worked on the productive side of society... have NO idea how to run a country or a backery.

HowdyDoody's picture

Britain has long imported Russian gas, but they group it under supplies from the EU. They can then pretend that they are boycotting Rusian gas.

In 2015, about 13% came from Russia and 8% from Norway.

https://www.britishgas.co.uk/the-source/our-world-of-energy/energys-gran...

Ghost of PartysOver's picture

So Putin taking the high road and not letting the UK freeze.  Whodathiunkit.  Sure he is getting some much needed cash but he could have held out for more once the 17 British teeth started to chatter.

Escrava Isaura's picture

……….politicians who NEVER have worked on the productive side of society

You are an idiot. 35% are professionals. 25% are business. You can see the numbers here.  

You forgot to mention that the British conservatives voted to leave Europe. And, that England follows orders from the boss, US which is run by the left neoliberals and the right wingers neocons.

We’ll see the faces of the nationalists conservatives in the US when the US runs out of gas as well, because right now US imports 1 trillion cubic feet of natural gas for its consumption.

 

Bud Dry's picture

...where it turns into stars.

RafterManFMJ's picture

...world’s first icebreaking LNG carrier, the Christophe de Margerie.

How fucking cool is that?

swmnguy's picture

I'd be a lot more confident in the second or even tenth icebreaking LNG carrier, myself, if I were depending on it (or anywhere near it).

buttmint's picture

Vlad the Impaler....name of the LNG ship is the "Christophe de Margerie." Ring a bell ZHers? Putin does have a wicked sense of humor.

Christophe de Margerie is the former (executed)president of Total (France) who got executed by the CIA at Moscow's airport. CIA sent a SNOWPLOW down the runway in September to collide with Margerie's private jet during take off.

Margerie's crime? He signalled a willingness to do business with Russia and to accept PETROLEUM payments in "other than USD."

helluva take-down by CIA thugs.BRUTAL.

Looks like Vlad is having the last laugh. No way could any of us make this stuff up!

 

 

 

DPLETTENBERG's picture

Wow! An ice breaking LNG tanker. That seems like a great idea. If we had one we could ship north slope gas from Alaska directly to Europe over the north pole. 

Well, we may not have an ice breaking LNG tanker but we do have 19 aircraft carriers.

Chupacabra-322's picture

@ Law,

Here’s the icing on the Russian Cake.

They’ll eventually ask for payment in Gold.

What Gold?

I faintly remember that former British PM (Name escapes me) selling off a good percentage of their Gold years ago.

(Room full of Russian Oligarch’s slamming down Vodka shots, slamming hands in the table, crying in hysterical laughter.)

Consuelo's picture

 

 

For around ~$200/oz. or therebouts...

manofthenorth's picture

Maybe they can borrow some from Canada.............

HA HA HA HA !

HowdyDoody's picture

They also notified of the sale publicly in advance. It was almost as if they wanted the buyer (a banskter facing a call?) to get away with paying the lowest price.

webmatex's picture

The bids did go to the lowest price. Seriously.

agNau's picture

Gordan Brown

Known as Browns' bottom.

Chupacabra-322's picture

Thank you,

No wonder that Shit stain’s name escaped me.

JohninMK's picture

Gordon Brown when he was Chancellor of the Exchequer.

Urban Roman's picture

But but but, they can buy LNG from us. You know, US? Or, why not ethanol? They can heat with ethanol from our conrbelt, it's so cheap! /s

HowdyDoody's picture

The US buys LNG from Russia to sell to the EU.

The US is totally desperate to break the EU-Russia energy market that they will resort to any scam that appears to show that the EU is moving away from Russia to US for its energy.

E5's picture

Two men enter

One man leaves

HRClinton's picture

Pounds to Rubles or Bitcoin?

shitshitshit's picture

they'll make a 0.00000002% discount if brits send Alekssandr Vinnik back to the motherland

Stonecity's picture

So Britain, how's that global warming and renewable energy working out for you thus far..

HRClinton's picture

One World Government? It's every oligarch for himself, baby.

Chupacabra-322's picture

China’s SWIFT alternative payment system & “The Silk Road.”

More Vodka Shots, hysterical laughter, Gold, Oli & hookers.

loves the truth's picture

Exactly!!  These Communists are INSANE! They want to destroy any and everything to bring in their EVIL rulership by the UN!

Last days kids...

zeroboris's picture

Vlad, it's time to cut gas export to the UK. Let the cold war be cold.

HRClinton's picture

Russians are businessmen not ideologues.

Mercantalism is the new state ideal.

ParkAveFlasher's picture

Better a paying addict than a dead customer.

JohninMK's picture

The Russians will just be disappointed that this ship is nowhere near as big as the Qatari ships which don't have to be to virtual icebreaker standards. Mind you it probably won't be them getting the gouging profit, that will go to the canny Malaysians.

It is a real strategic mistake for the UK to abandon its huge under North Sea storage capacity. This is due to our energy market being 'market driven' and as the end consumer is the one to suffer price rises or supply issues then the energy companies won't pay for the stoage as it won't be priced in to make them a profit.

Strategic asset for the country, like the US for example? Just isn't on the list.

Demologos's picture

Redirect the LNG to where it will get a better price and send a shipment of sweaters to the UK instead.

cookies anyone's picture

britbob be like: but we wuz kangz, falkland, gibraltar, mrghrmhrm

falak pema's picture

Like I said : Natural gas to hydrogen cars! One real option for UK.

At least Putin gets that right today.

When Permafrost melting begins in Siberia Putin or his successor will feel the bite of methane slippage!

LA_Goldbug's picture

We will ALL feel it. Methane is the worst gas you could released into the atmosphere. Read to find out why ?

Kayman's picture

"When Permafrost melting begins in Siberia"

Your personal carbon chain will be reduced to a simpler form long before that happens.


falak pema's picture

Spoken like a true dinosaur.

falak pema's picture

You will also note that tanker/ice Breaker is named after defiant French Total CEO and Oligarch, who despite embargo, charged on... and ended up mysteriously dead in his plane crash in Moscow airport; allegedly as a designated victim of a foreign power hit job...

Which probably explains Putin's ire in ramping up cyberwar hanky panky and alleged election meddling.

After all, we all know "its all fair in love, FIFA deals, Olympic spiels and cyber-wars!" 

Anything goes behind the tinsel curtain of "fake news and true spy games of blood n guts."