Russia’s president Vladimir Putin oversees the loading of the first tanker from the Yamal LNG project in Russia’s Arctic last week © EPA
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UK homes are set to be heated over the new year with gas from a Russian project targeted by US sanctions, as the shutdown of a key North Sea pipeline slashes domestic output and sends utilities and traders scrambling for supplies.
The first tanker of liquefied natural gas from the Yamal LNG project in Russia’s Arctic, which was opened by president Vladimir Putin last week, is making its way to the Isle of Grain import terminal in Kent as UK gas prices soar.
The shipment of the super-chilled cargo to the UK, which was originally expected to go to Asia, will be cheered in Moscow, where the Yamal LNG project has been held up as evidence it can withstand western sanctions, while arguing that Europe will remain reliant on Russia for gas.
The UK government has taken a tougher line against Russia in recent weeks, with Theresa May, prime minister, accusing Moscow of meddling in elections and attempting to “weaponise information” to undermine the west.
Bringing in the tanker will highlight questions about the UK’s energy strategy and the security of supplies, as it follows the shutdown of a three-decade-old pipeline this week that has cut off 40 per cent of oil and gas from the UK North Sea, sending gas prices to four-year highs and sparking fears of potential shortages.
While it is not unusual for the UK to import Russian gas that has come by pipeline through other European countries, the scheduled December 28 arrival of the Christophe de Margerie LNG tanker will be the first delivery to arrive by ship, with the loading of the tanker personally overseen by Mr Putin last week.
While UK and EU sanctions do not directly target Yamal LNG, they have imposed other sanctions that cut off Russian energy companies from finance or technology for certain projects, levied after Moscow’s 2014 annexation of Crimea. A person close to Russia’s energy ministry said that the tanker delivery made the UK’s decision to back sanctions against Moscow “look like someone biting the hand that feeds him”.
The Department of Business, Energy and Industrial Strategy (BEIS), which has argued that gas supplies will still be ample this winter because of the UK’s import capacity, emphasised that 80 per cent of the gas consumed in the UK is domestic or bought from Norway or Qatar.
BEIS said that it was up to the market to decide what gas to import. The LNG cargo has been bought by the London-based trading arm of Malaysia’s Petronas, which did not respond to requests for comment.
“Whether this liquefied natural gas shipment is eventually consumed in the UK is down to the market,” BEIS said. “But we can only benefit from having a diverse range of supplies.”
With more than two weeks until the tanker’s arrival — it is currently off the northern coast of Norway — the vessel could still be redirected if someone is willing to pay a higher price.
The UK was already becoming more dependent on daily imports as domestic gas production has declined and old storage facilities have shut.
Frank Harris at Wood Mackenzie, an Edinburgh-based energy consultancy, said that the shipment demonstrated that the UK was now reliant on a market-based import model for its gas supplies.
“There’s great flexibility in that model, but ultimately you’re competing with other countries on price for supplies,” Mr Harris said.
The Yamal tanker was loaded on Friday in a ceremonial launch of the project orchestrated by Mr Putin, who pushed the button to start filling the tanker in sub-30C temperatures.
He hailed it as an “extremely important project . . . that ensures the future of Russia and the future of its economy”.
Moscow sees Yamal as a major victory in the face of sanctions, starting operations on time and on budget despite US curbs specifically designed to undermine new Russian energy projects.
Novatek, which operates Yamal, was forced to perform financial gymnastics after US sanctions cut it off from western financing in 2014; converting the $27bn project funding into euros and turning to Chinese lenders for a $12bn loan. Novatek declined to comment
France’s Total, which has partnered with Novatek on Yamal, continued working on the project after the EU did not the follow the US in directly imposing sanctions on it. Total has dubbed Yamal “the gas that came in from the cold”.
Additional reporting by Emiko Terazono