New Delhi: China has now received its sixth cargo from Russia’s sanctioned Arctic LNG 2 project, delivered to the Beihai LNG terminal on 22 September by the 174,000-cubic-meter Arctic Mulan carrier. Despite clear evidence of imports from a sanctioned facility, no penalties have been imposed so far, raising questions over US enforcement.
“In a mostly tepid LNG market, some of the biggest focus has been on how the US will react, given that China has taken delivery of its sixth cargo from the sanctioned Arctic LNG 2 project, with no penalties imposed so far for breaching sanctions,” said Lu Ming Pang, senior analyst at Rystad Energy. “The US has so far remained silent, as China puts the US threat of sanctions to the test.”
Why does this matter?
The Arctic LNG 2 project has two trains, each with a capacity of 6.6 million tonnes per annum (mtpa). Any sustained increase in supply could weigh on global LNG prices. But output is still limited by production constraints and the availability of specialised Arctic-class carriers, particularly with winter approaching.
For now, China remains the only major buyer willing to risk imports, with other countries unlikely to test sanctions. If shipments rise or diversify to other destinations, analysts say a stronger US response could follow.
What is happening to LNG prices?
Spot LNG prices have softened across major hubs:
1. In Asia, November delivery prices declined to $11.35 per MMBtu on 23 September, from $11.45 a week earlier.
2. In Europe, the Dutch TTF benchmark fell to $10.98 per MMBtu on 24 September, down from $11.29 the previous week.
3. In the US, Henry Hub prices also slipped to $2.88 per MMBtu on 24 September, compared to $3.10 a week earlier.
Higher Norwegian pipeline flows after maintenance and steady Russian Turkstream supplies have helped stabilise European markets. Storage in the EU stood at 82.1% or 93.2 bcm on 22 September, comfortably above last year’s levels and on track to meet the bloc’s 90% target before winter.
How are Asian markets responding?
China’s imports coincided with Typhoon Ragasa, which disrupted ports in South China and temporarily limited LNG intake. Meanwhile, weather patterns in Japan and South Korea are shaping demand:
1. Japan faces a 70% probability of above-normal temperatures until mid-October, with forecasts of colder conditions by December.
2. Korea’s outlook has shifted to lower-than-expected temperatures in early October, raising short-term heating demand.
Japanese utility LNG inventories rose to 1.88 million tonnes as of 21 September, up from 1.75 Mt a week earlier, but below August levels. Spot buying has remained muted as utilities rely on contracts and coal-fired power.
What about Europe?
Europe has seen pipeline flows from Norway recover to 284.7 MMcmd on 23 September, compared to 230.6 MMcmd during maintenance earlier this month. Any unplanned outages — such as those at Troll and Oseberg fields — could briefly lift prices, but overall supply looks stable.
Cooling autumn temperatures may temporarily raise heating demand, but forecasts suggest a return to above-normal weather in October, limiting sustained pressure on demand.
What is the US position?
US dry gas production remained steady at 107 bcf per day in mid-September, higher than the 101 bcf during the same period last year. Feedgas supply to liquefaction plants dipped slightly due to pipeline maintenance but is expected to recover.
New projects are advancing: Port Arthur Phase 2 (13.5 mtpa) has reached financial close, while the Golden Pass terminal (18.1 mtpa) has secured approvals to begin commissioning activities. Storage levels have risen to 3.43 trillion cubic feet as of 12 September, nearly catching up with last year.
The bigger picture
The continuation of Russian LNG flows into China highlights the limits of sanctions enforcement and underscores how geopolitics intersects with energy markets. Additional supply from Arctic LNG 2 could keep prices subdued, but constraints in production and shipping remain.
As Rystad’s Lu Ming Pang notes: “Exports remain constrained by production constraints on site and limited shipping capacity and will restrict how much LNG will be able to reach buyers who are willing to test sanctions.”
For Asia and Europe, the short-term outlook will depend on weather, storage, and shipping disruptions, while in the US, stable production and new projects will shape supply growth.
