Following the discharge of a sanctioned Russian LNG carrier, the Arctic Mulan, at a port in China, LNG traders are evaluating the potential for new sanctions and the implications for trade. The event has raised concerns among some market participants, who may now choose to avoid the Chinese port of Beihai.
Market Implications and Sanctions Risk
The arrival and discharge of the sanctioned vessel at the Beihai terminal on August 29 has created uncertainty in the LNG market. According to traders, some companies are now avoiding the port, and there’s a belief that the incident could lead to further sanctions. One source noted that sellers typically vet discharge ports, and accepting a sanctioned cargo might be seen as imprudent behavior.
The vessel had previously been at a transshipment hub in Kamchatka, Russia, which is used for Arctic LNG 2 cargoes. The US imposed sanctions on the project’s transshipment company, Arctic Transshipment, in September 2023, specifically targeting the floating storage units (FSUs) that facilitate the transfer of LNG from ice-class tankers to conventional vessels.
The Beihai Terminal and Its Operators
The Beihai LNG terminal, located in the Guangxi Zhuang Autonomous Region, has an annual receiving capacity of 6 million metric tons. It is operated by PipeChina, a national energy infrastructure company co-owned by major state-owned enterprises like PetroChina, Sinopec, and CNOOC. While PipeChina’s mandate is to provide fair access to its infrastructure, the use of the terminal by a sanctioned vessel raises questions about who ultimately approved the transaction.
Broader Context of Sanctioned Russian LNG
This event is part of a larger trend of Russia’s efforts to find markets for its sanctioned LNG. Novatek, the main stakeholder in Arctic LNG 2, has struggled to find buyers since US sanctions were imposed. Several sanctioned Russian LNG carriers, previously seen at the Arctic LNG 2 facility, are currently sailing in the Sea of Japan, suggesting that more cargoes may be seeking a discharge port. Analysts believe that if this discharge goes without a reaction from the US, it could signal to China and other buyers that it is acceptable to purchase sanctioned Arctic LNG 2 cargoes.
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Source: S&P Global
