Shipment term

Russia halts natural gas shipment to Asia over payment issues

  • Russian company Sakhalin Energy has halted a delivery of liquefied natural gas to an Asian buyer, according to a report.
  • This is the first time gas has been denied to an Asian buyer, a move could lead to power outages.
  • It will have spillover effects in Europe as it prepares for its own energy crisis in the coming months.

Russia halted a delivery of liquefied natural gas to an Asian customer due to payment issues with its new energy operator, Sakhalin Energy. This is the first sign that Russia is starting to withhold natural gas from Asian customers on its energy operations, threatening to throw some of its biggest Asian customers into blackouts this winter.

Two traders with knowledge of the matter said Sakhalin Energy withheld a shipment of LNG from an Asian buyer over payment and a delay in signing a revised contract, according to a Bloomberg report.

Russia has offered these revised contracts to Asian customers since the establishment Sakhalin Energya new company created to transfer ownership of Russia’s oldest LNG facility from a Bermudian to a Russian entity.

The revisions ask LNG buyers to pay with currencies other than the US dollar if Western sanctions lead to payment issues. But most Asian customers have avoided signing up so far, Bloomberg reported.

Withholding fuel from Asian buyers could spell trouble for Northeast Asia, which has seized on LNG in anticipation of winter. Japan, Sakhalin’s biggest buyer, is particularly vulnerable to blackouts this winter if shipments are cut off, as it sources about 9% of its natural gas from Sakhalin.

It could also have spillover effects on Europe, as Asian customers could nibble on fuel supplies from non-Russian suppliers, which are already running out of supply as Europe braces for its own energy crisis this winter.

“Without Sakhalin, Northeast Asia will have to draw more cargo away from Europe, intensifying the gas rush between Asia and Europe as winter approaches, which could push up prices. LNG prices at all-time highs,” energy analyst Saul Kavonic told Bloomberg.

US natural gas is currently hovering around $9 per million British thermal units, and the benchmark price in Europe has risen to $67 per million BTU, with the potential to rise even higher under additional supply pressure. .