Analysts expect limited impact from UK sanctions on Chinese LNG terminal absent US response

Market watchers expect the recently announced UK sanctions on China's Beihai LNG terminal to have a limited impact on the flow of sanctioned Russian cargoes that have been arriving since late August, unless other countries follow suit, particularly the US.

"I don't expect UK sanctions to have the same impact as direct US sanctions on Beihai would," Anne-Sophie Corbeau, a research scholar with Columbia University's Center on Global Energy Policy, told Platts.

A Europe-based analyst said the UK sanctions on their own would have "no impact."

"The only significant ramification is that there can be more pressure on [the] US to impose sanctions following [the] UK sanctions example — and that will be something the market will be watching closely," the analyst said.

Jean-Christian Heintz, managing director of consultancy Wideangle LNG, was slightly less dismissive of the geopolitical signal. "On the diplomatic side, the UK remains relevant," he said. "There might be a snowball effect at some point if more people do it."

UK sanctions

The UK's Foreign, Commonwealth & Development Office said Oct. 15 it was sanctioning the Beihai LNG terminal, as well as seven tankers involved in the transit of Russian LNG.

The move is the most severe governmental response yet to the steady stream of sanctioned cargo arrivals.

The Tieshan terminal at the Port of Beihai in southern China's Guangxi region has received nine cargoes from Russia's sanctioned Arctic LNG 2 project since late August, according to data from S&P Global Commodities at Sea. The latest tanker carrying a cargo from the project departed the terminal the same day the UK announced the punitive measures, CAS data showed.

Platts, part of S&P Global Energy, assessed the December JKM, the benchmark price for LNG cargoes delivered to Northeast Asia, at $11.124/MMBtu on Oct. 16, up 4.21% from the previous day.

The benchmark is virtually unchanged compared to Aug. 28, when the first Arctic LNG 2 cargo arrived in China. At that point, the JKM price was assessed at $11.001/MMBtu.

Novatek holds a 60% stake in Arctic LNG 2, alongside France's TotalEnergies, China's CNPC and 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.