Russia starts exporting gas to US

First Russia's liquefied natural gas (LNG) shipment will be delivered to the US in January: Engie's tanker carrying a cargo from the Yamal LNG project in Russia is heading to Boston as freezing weather in the northeast of the US sends prices soaring.

Gaselys tanker carrying liquefied natural gas from storage tanks at the United Kingdom’s Isle of Grain appeared yesterday to be heading to Boston, according to shipping data reported by Bloomberg.

The vessel was chartered by Engie, the French energy company that owns the Everett LNG import terminal in Boston. The Gaselys left the Isle of Grain terminal in Kent on Sunday and was tentatively scheduled to arrive in Boston on January 22, the Times reported.

It would be the first time gas has been shipped from Britain to the US, according to Ed Cox, LNG expert at Icis, the price reporting agency.

Prices in the U.S. Northeast have soared in the last seven days after a massive snowstorm battered the East Coast. Temperatures in New York City have remained below freezing since the day after Christmas. Next-day gas prices in New York City NG-CG-NY-SNL reached a record $140.25 per million British thermal units (mmBtu), according to data from brokerage firm SNL going back to 1992. The prior high was $120.75 set during the polar vortex in January 2014.

Spot gas in New England soared to a record $82.75/mmBtu, according to data going back to 1995. The prior high was $77.60 in January 2014.

In 2017, next-day gas prices averaged $3.08/mmBtu in New York and $3.80/mmBtu in New England.

Sberbank CIB analyst Valery Nesterov, speaking with a correspondent of Vestnik Kavkaza, noted that deliveries of Russian LNG to the US showed the true state of affairs in the global gas market. "This event underscores the need to maintain close cooperation between producers and consumers of energy around the world and improve markets. I recall that the US was once considered an important market for Russian LNG," the expert said, adding that everything changed after the "shale revolution".

Valery Nesterov called low prices among the reasons for the purchase of Russian gas by intermediary companies and, ultimately, the US. "The Yamal LNG project is competitive due to low unit costs of production and the ability to sell gas at relatively low prices. The crisis was also affected by the fact that although the Henry Hub prices are low, gas becomes very expensive after transportation: the country's territory is large, gas pipelines are weaker than ours. That is, there is a situation in which the LNG pipelines and infrastructure could not provide for the rapid redirection of gas supplies to freezing areas. So they had to buy LNG on the spot market. Russia's LNG tanker was the closest and offered the most favorable terms," he said.

The executive vice-president of NewTech Services, professor of the Gubkin Russian State University of Oil and Gas, Valery Bessel, also noted the high competitiveness of Russian LNG. "It is also important to emphasize that this case confirms the importance of diversifying gas supplies abroad through LNG technologies," he explained.

It is interesting that Russia could supply LNG to both US coasts from different fields. "The US market consists of two parts, the western and the eastern coast, and we can send gas to the west coast from our Sakhalin-2 project, which is sold to Japan, South Korea and China now. As for the east coast, the first shipment of the Yamal LNG plant was a brilliant achievement of NOVATEK, Gazprom and their partner," Valery Bessel concluded.