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Russia's Sakhalin LNG outage shakes Asian spot markets

Singapore — A production outage at Russia's Sakhalin LNG has shaken supply confidence and lifted spot prices in the Asian markets, despite plant operator Sakhalin Energy saying it did not expect a significant impact on its LNG delivery schedule.

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After a technical malfunction forced the shutdown of one of Sakhalin LNG's two trains earlier this week, Sakhalin Energy said Thursday it expected repairs to be completed within the coming days.

Global LNG markets were quick to react however, with the Platts JKM for October deliveries rising 10.1 cents/MMBtu to $11.375/MMBtu Thursday.

Unplanned shutdowns at Sakhalin, which has more than 8.5 million mt/year in long-term contracts with South Korea's Kogas and several Japanese gas and power utilities, tend to have significant impacts on Asian LNG fundamentals and prices.

An outage in January 2016, which led to a 50% reduction in the facility's production and a force majeure declaration, resulted in a 17% hike in the JKM, which rebounded 85 cents/MMBtu over four days, from a six-year low of $4.95/MMBtu.

LNG traders, who declined to be named, said the most recent shutdown could be extended into mid-September and result in potential scheduling delays and the loss of up to five LNG cargoes.

"We are hearing it is a compressor failure," a European trader said Thursday.

Meanwhile, export shipments from Sakhalin have slowed down. Average daily exports in August to date are at 34.8 million cu m, down 2 million cu m from July, S&P Global Platts Analytics data showed.

The two-train facility has a combined nameplate capacity of 9.6 million mt/year, but production has remained consistently above 10 million mt/year since 2012.

Sakhalin Energy is a joint venture between Gazprom (50%), Shell (27.5%) and Japanese trading houses Mitsui (12.5%) and Mitsubishi (10%). -- Abache Abreu, abache.abreu@spglobal.com

-- Eric Yep, eric.yep@spglobal.com

-- Edited by Irene Tang, irene.tang@spglobal.com