博彩对冲

The EU wants to end Russian spot LNG imports into the bloc, part of its REPower EU road map, but market sources warn that the EU's latest regulatory target may be elusive.

The European Commission, the EU's main executive body, is aiming to completely halt spot LNG imports from Russia by the end of this year, with a ban on long-term contracts following by the end of 2027, EU Energy Commissioner Dan Jorgensen told journalists in Brussels on Tuesday.

However, Jorgensen did not provide details about how such a ban would be enforced from a practical point of view, leaving market sources skeptical.

Everything or Nothing

Last year, the EU imported a record 16.5 million tons of Russian LNG, almost 20% of total annual EU LNG imports, with more than 95% of Russian LNG coming from the Yamal LNG plant in the Russian Arctic, according to Kpler data.

While the majority of Yamal volumes are being delivered through long-term contracts, the 17 million ton per year liquefaction project 鈥� which last year exported 21 million tons of LNG, well above its nameplate capacity 鈥� sells a significant chunk of its production on the spot market.

Sources contacted by 博彩对冲 argue that enforcement of the EU spot LNG ban is complicated due to the lack of transparency in the spot LNG market.

"I have always thought that they could only impose on ban on everything or on nothing," a senior trade executive at a major commodity trading house told 博彩对冲. "The differentiation by contract [type] will be difficult to implement," he said.

An LNG trader at a European utility agreed, suggesting that buyers of Russian LNG would need to "open their books" to disclose whether they are purchasing on a spot basis or through a term supply contract.

"It will make it very hard to enforce," the LNG trader added.

Swiss Miss

Jorgensen stated during a press conference on Tuesday that "existing spot contracts will be stopped by the end of 2025," but it is not clear how the EU would be able to identify companies that are buying Russian LNG on a spot basis and prevent them from doing so, particularly given very limited regulatory oversight in the physical spot LNG market.

Moreover, the term "spot contracts" used by the EU energy commissioner is also somewhat confusing, given that bilateral spot LNG deals consist mainly of ad hoc cargo purchases, mostly driven by the short-term necessities or portfolio optimization needs of market participants, and are not term contracts as such.

Enforcement of the EU measure could be further complicated by the fact that some companies suspected of involvement in the trade are not located in the EU. Visibility as to the buyers of Russian spot LNG has also been reduced significantly in recent years.

博彩对冲 reported that second-tier Swiss trading houses 鈥� namely MET, DXT Commodities and Enet Energy 鈥� were the main buyers of Yamal spot LNG volumes into Spain between June 2022 and August 2023.

If trading firms based in non-EU Switzerland continue to be the key buyers of spot LNG cargoes from Russia, the commission could face serious obstacles in obtaining sensitive commercial information from those entities given Switzerland's notorious reluctance to disclose such information.

"Without a doubt [it would be an issue]. Switzerland is extremely strict on not allowing its companies to share information with external regulators," said the senior trade executive.