Russia expands shadow LNG fleet to beat EU crackdown

{"text":[[{"start":9.2,"text":"Russia has been quietly increasing its shadow fleet of gas-carrying ships, adding second-hand vessels and its first domestically built tankers ahead of an EU ban on the country’s liquefied natural gas cargoes that comes into force next year."}],[{"start":22.76,"text":"At least eight second-hand LNG tankers have been sold and subsequently used to carry Russian cargoes in the past six months, according to maritime data company Windward. That brings the size of the fleet to 25 ships, including two new vessels built at Russia’s Zvezda shipyard."}],[{"start":38.76,"text":"The growing fleet will allow Moscow to keep shipping gas when restrictions tighten in 2027, mirroring how Russia has used a “dark fleet” of oil tankers to evade western sanctions. Europe has imposed gradually tightening restrictions intended to cut the fossil-fuel revenues helping the Kremlin fund its war in Ukraine."}],[{"start":57.6,"text":"Irina Mironova, senior researcher at the New Energy Advancement Hub, said: “The oil shadow fleet had precedents in Iran and Venezuela. But no other country had reached that level of technological advancement in gas production by the time it got sanctioned.”"}],[{"start":72.36,"text":"“It’s a unique phenomenon,” she added."}],[{"start":74.44,"text":"EU countries, which bought almost all of the Siberian plant Yamal’s output in the first half of this year, will be banned from importing all Russian LNG from 2027. Some Russian LNG facilities are already hit by sanctions under separate measures, including Novatek’s Arctic LNG 2 project."}],[{"start":91.96,"text":"The EU last week said the sale of LNG tankers to Russian citizens must be notified to Brussels but it stopped short of banning the transport of LNG on EU tankers to third countries after heavy lobbying from Greece."}],[{"start":105.04,"text":"While Russia’s oil shadow fleet now numbers more than 1,000 ships operating outside western insurance and paperwork, Moscow has been slower to venture into gas carriers, which are far more complex vessels."}],[{"start":null,"text":"

"}],[{"start":116.16,"text":"Four of Russia’s recently acquired gas ships have carried volumes from hubs that handle LNG falling under western sanctions, Kpler data analysed by the FT shows. All are now under the Russian flag and were given similar new names: Kosmos (“space” in Russian), Orion, Merkuriy, and Luch (“ray”)."}],[{"start":136.16,"text":"Russia has also built its first two LNG carriers at its Zvezda shipyard on its far-eastern coast. The first, Aleksey Kosygin, has been shipping cargoes from Arctic LNG 2 since it was delivered to state shipping major Sovcomflot in December. A second vessel, the Konstantin Posiet, was named at a ceremony this month."}],[{"start":155.36,"text":"Privately owned Novatek dominates Russia’s LNG scene. Its flagship Siberian plant Yamal, together with the sanctions-hit Arctic LNG 2 plant, produces more than 65 per cent of the country’s output, according to Russia’s official statistical body. Sakhalin-2, a project in Russia’s far east owned by state energy giant Gazprom, delivers another 30 per cent."}],[{"start":177.48,"text":"Much of the volumes from plants not hit with sanctions are carried by tankers chartered from international companies, including Greece’s Dynagas, Japan’s Mitsui OSK and Seapeak. But the wave of western restrictions has forced Moscow to diversify."}],[{"start":null,"text":""}],[{"start":191.56,"text":"Shadow LNG tankers are mainly owned by Russia-linked shell companies in jurisdictions such as Dubai, Hong Kong and Singapore, and use flags of convenience. They resort to the same practices as those of the oil shadow fleet, including frequently jamming signals and conducting ship-to-ship transfers to disguise their cargo’s origin."}],[{"start":210.48,"text":"“The tactics are broadly the same, but the execution is significantly more difficult because of the nature of LNG transport,” said Septimus Knox, a director at a corporate intelligence firm S-RM."}],[{"start":222.04,"text":"“There are fewer vessels and it requires rarer and more specific infrastructure,” he added. “It’s not really possible to acquire and operate ‘rust bucket’ LNG tankers in the same way — the global fleet is much smaller and much more modern, and the majority of modern, sophisticated LNG infrastructure is situated in countries not aligned to Russia.”"}],[{"start":240.78,"text":"The highly chilled gas carriers are among the most specialised ships in the world, costing about $300mn to build and carrying complex containment systems to keep the gas in liquid state at minus 162C so that it can be transported."}],[{"start":257.84,"text":"Adding to the challenges, Russia’s vital production facilities are located in the Arctic zone, which means that for most of the year, ice-class vessels — whose hulls protect them from being smashed by the thick Arctic ice — are required to at least get to the nearest floating storage."}],[{"start":273.64,"text":"China is the only buyer of sanctions-hit Arctic 2 LNG production. Eleven vessels with an average age of 10 years are lifting volumes from the Arctic LNG, the FT estimated based on data from Kpler. The cargoes are transferred to conventional tankers at floating hubs that take them to China."}],[{"start":291.96,"text":"All these vessels are under US sanctions, and Novatek has become the owner or charterer of all but one of them in the past two years."}],[{"start":300,"text":"Another four ships are under construction at Zvezda, while six ice-class vessels are blocked from being delivered at the Hanwha shipyard in South Korea because of sanctions."}],[{"start":null,"text":""}],[{"start":309.72,"text":"Navin Kumar, director of maritime research at consultancy Drewry, said Russia could soon struggle to construct its own ships as the French company GTT has a near monopoly on the production of the highly specialised containment systems to keep the gas pressurised."}],[{"start":324.6,"text":"GTT said in January 2023 that it would be suspending any Russian contracts as a result of EU sanctions."}],[{"start":332.28,"text":"Even if Russia could develop its own containment system, it would require approvals from the International Maritime Organization and classification societies, which set and approve technical standards for ships."}],[{"start":342.92,"text":"This would be a “long-drawn-out process” and likely force Moscow to source more ships on the second-hand market, Kumar said."}],[{"start":350.64,"text":"Carl-Antoine Saverys, chief executive of Exmar, a major gas shipping company, said Exmar was competing with Russian buyers for second-hand LNG carriers, which his group converted into floating gas storage."}],[{"start":362.56,"text":"“There are a lot of older vessels coming on the market so I do believe a portion of those will go to the Russian fleet,” he said."}],[{"start":374,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1785822611_6709.mp3"}