LNG market mulls potential fallout from Russian cargo discharge in China

LNG traders on Sept. 1 were assessing the implications for trade flows after the Arctic Mulan, a sanctioned Russian LNG carrier, discharged a cargo at the southern Chinese port of Beihai on Aug. 29, raising concerns about the risk of potential new sanctions.

The traders surveyed by Platts, part of S&P Global Energy, also note that market participants might choose to avoid the Chinese port.

"Now some trading houses are indeed avoiding using Beihai," a Chinese trader said, adding that these companies are not ruling out the possibility of refraining from using the terminal.

The Arctic Mulan -- a sanctioned Russian LNG carrier -- departed from the Tieshan terminal in the Port of Beihai in southern China on Aug. 29, after arriving Aug. 28, S&P Global Commodities at Sea data showed, with shipping sources saying the ship had discharged a cargo.

The Aug. 28 arrival followed a late-May call at Kamchatka in Russia's Far East -- which is used for shipping Arctic LNG 2 cargoes -- specifically at the eastern Russian port of Petropavlovsk-Kamchatsky on the Kamchatka Peninsula.

Kamchatka is also home to the 360,000 cu m Koryak floating storage unit, which serves as an LNG transshipment hub.

The Chinese trader said the market might have only priced in two to three cargoes a month for Arctic LNG 2, compared with five to eight cargoes a month.

"There is some downside risk recently," the trader said, adding that two LNG cargoes were already available in the Koryak FSU. "Most participants are still on the sidelines."

A source at a European utility said: "With [more] Arctic LNG 2 cargoes [potentially] going into China, reload cargoes being sold from China will be even tougher to take."

"Sellers typically conduct vetting of discharge ports. Since Beihai has now received a sanctioned cargo, the buyer/operator can be deemed to have not acted in reasonable and prudent behavior."

Arctic Transshipment -- a subsidiary of Russia's Novatek -- developed the Koryak and Saam FSUs to facilitate the transfer of LNG from ice-class tankers to conventional vessels for onward shipment.

The US imposed sanctions on Arctic Transshipment in September 2023, with Washington saying that the company's two FSUs could create "strategic Northern Sea Route transshipment points for Russia's Arctic LNG 2 project."

The US Treasury declined to comment Aug. 29 on the reported discharge from the sanctioned vessel.

"While Treasury does not comment on specific allegations, we take allegations of sanctionable conduct extremely seriously," a spokesperson for the US Treasury told Platts.

Beihai terminal

Located in the Guangxi Zhuang Autonomous Region in southwestern China, the Beihai LNG terminal has an annual receiving capacity of 6 million mt. It features a dedicated berth capable of accommodating LNG carriers ranging from 80,000 to 266,000 cu m, along with four LNG storage tanks, each with a capacity of 160,000 cu m.

The terminal is currently operated by China's national energy infrastructure company, the National Oil and Gas Pipeline Network Group (PipeChina). According to public business registration information, PipeChina is jointly owned by several state-owned enterprises and organizations, including PetroChina (29.9%), Sinopec (14%) and CNOOC (2.9%).

Originally developed and owned by Sinopec, the terminal was transferred to PipeChina in 2020 as part of China's broader energy market reforms.

Historical shipping data from Energy indicates that Sinopec remained a frequent user of the terminal after the transfer. However, other companies, including PetroChina, CNOOC and some non-state-owned enterprises, have also utilized the facility.

One of PipeChina's core mandates is to ensure fair and non-discriminatory access to its infrastructure. As a result, the Beihai LNG terminal is open to third-party users.

Mixed views

Traders said they are evaluating the situation after the Arctic Mulan discharged the LNG cargo at Beihai.

"It is hard to determine who is using the Beihai terminal at this point. Even if you know who has slots at Beihai, the slots are constantly being resold, so you cannot use this to infer whose cargoes they are," said a source based in eastern China.

A Singapore-based trader said it is a "wait-and-see situation" for now.

Another Singapore-based trader said, "I do not think China is eager to buy Arctic 2 cargoes because risks are high."

A Middle East-based trader said that "if this continues, the US will notice it and may do something to China."

Two other sanctioned Russian LNG carriers -- both previously seen at the Arctic LNG 2 facility before heading east along the Northern Sea Route -- are currently sailing in the Sea of Japan. As of 1212 GMT on Sept. 1, the Voskhod was sailing northwest of Hagi City in Yamaguchi Prefecture, while the Zarya was heading southwest.

The Christophe de Margerie is anchored near the Koryak FSU in Russia's Far East, having previously been spotted at the Arctic LNG 2 facility before heading east along the Northern Sea Route.

The ship, sanctioned by the EU in December 2024, was the first LNG tanker to load a cargo from the Yamal LNG plant in December 2017 and was regularly used to transport LNG from the facility.

Some of the first cargoes loaded at Arctic LNG 2 in August 2024 ended up at Koryak or the Saam FSU in Murmansk.

In June, following the commissioning of the second train, it emerged that loadings from the Arctic LNG 2 project had resumed, with the Iris -- formerly called the North Sky -- arriving at the site June 26, according to CAS. The Iris was sailing south of the eastern Russian port of Petropavlovsk-Kamchatsky on the Kamchatka Peninsula at 1123 GMT on Sept. 1.

The Voskhod -- formerly called the North Mountain -- arrived near the facility July 19, followed by the Zarya -- formerly known as the North Way -- on July 29, CAS data showed. Both ships are under US and EU sanctions.

Novatek holds a 60% stake in Arctic LNG 2, alongside France's TotalEnergies, China's CNPC, China's CNOOC and Japan Arctic LNG, all of which have 10% stakes.

Japan Arctic LNG BV is a Dutch corporation that is 75% owned by the Japan Organization for Metals and Energy Security and 25% owned by Mitsui.