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Russia nears start-up of its first LNG import facility at Kaliningrad

Singapore/London — Russia's Gazprom Neft is gearing up to start operations at the Kaliningrad floating storage and regasification unit terminal, the country's first LNG import facility, with the 174,000 cu m vessel Marshal Vasilevskiy en route with a commissioning cargo loaded at the Singapore LNG terminal.

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The facility will add to Europe's LNG demand and underscores the dependence of regions on seaborne gas supplies for energy security and diversification from pipelines. It also highlights how floating regasification systems are becoming instrumental in meeting gas demand due to their flexibility in deployment.

The 174,000 cu m Marshal Vasilevskiy departed Ulsan port on November 11 and docked at the Singapore LNG terminal on November 16, where it loaded a cargo of LNG, according to Singapore-based traders and S&P Global Platts vessel tracking system cFlow.

Marshal Vasilevskiy is a purpose-built Ice Class 1A FSRU built by South Korea's Hyundai Heavy Industries, and registered under Gazprom's subsidiary Gazflot, according to shipping data provider Vessels Value.

The FSRU went live in October 2018 and the beneficial owner is Gazprom Marketing & Trading, it said.

"We have it underway as a newbuild order heading for delivery," a Vessels Value spokesperson said.

The vessel's voyage is unique because it is a reversal of the traditional LNG trade flows from the Atlantic to Asia, and is facilitated by Marshal Vasilevskiy's ballast voyage and the need for a commissioning cargo at the destination in Kaliningrad.

Gazprom is likely to have procured the cargo at an attractive price to make the arbitrage to Europe feasible, according to Singapore-based traders. Commodity traders who took early positions are stuck with LNG cargoes on carriers or in storage tanks around Singapore as end-user inventories are well supplied. Traders with surplus LNG would be keen to offload cargoes to stem losses.

KALININGRAD FSRU

Russia holds the largest natural gas reserves in the world, its oil company Gazprom dominates the country's upstream gas sector, and it is a vital gas supplier, with almost 90% of natural gas exports sent to customers in Europe via pipeline in 2016, according to the US Energy Information Administration.

But like most large countries, energy supply to niche regions can become a logistical nightmare. In the case of Kaliningrad, the region is a Russian exclave with a population of about one million bordering Poland and Lithuania, but is not connected by land to greater Russia.

Kaliningrad's gas demand is increasing from building four new combined cycle gas turbines or CCGTs with a capacity of 454 MW at Pregolskaya TPP, of which the first unit commissioned in September, and the three remaining units are planned by the first quarter of 2019, Andre Lambine, senior gas analyst at Platts Analytics, said.

He said flows in the current gas pipeline from Russia are at times close to capacity, but instead of increasing the capacity of the Minsk-Vilnius-Kaliningrad pipeline, Kaliningrad chose LNG to supply the additional gas demand.

"We assume Kaliningrad FSRU will start operations in January 2019. This is Russia's first LNG import terminal," Lambine said.

Gazprom is constructing the facility on the coast of the Baltic Sea that will be connected to the existing pipeline near the Kaliningradskoye underground gas storage facility, making it possible to supply gas to local consumers and feed the storage facility. This will make the enclave self-sufficient in gas in case of any disruptions to the pipeline.

The FSRU, with a capacity of up to 2.7 Bcm/year, was initially planned by the end of 2017, but the timeline has been moved to the end of 2018, according to a person with direct knowledge of the matter.

"Right now commissioning activities are at full speed, especially after all the delays the vessel has faced during construction. The Russians do not want to lose anymore time," the person said, adding that the facility is designed to achieve security of supply.

Gazprom declined to comment on the status of Kaliningrad FSRU.

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

-- Lucie Roux, newsdesk@spglobal.com

-- Edited by Elizabeth Thang, newsdesk@spglobal.com

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