Flex LNG Ltd presented its first quarter 2024 results in a video webcast on May 23, 2024, where the CEO, Oystein Kalleklev, raised concerns over a Russian LNG-carrying dark fleet.
According to the presentation, Russian liquefaction capacity is poised for a substantial increase by 2030, doubling from approximately 36 million tonnes per annum (MTPA) to over 74 MTPA. This expansion comes at a time when major importers, notably the world’s largest LNG importer, continue to heavily rely on Russian LNG.
For instance, as of year-to-date 2024, this importer has already received around 6 million tonnes (MT), constituting 20% of its total imports, with 15.5 MT, comprising 15%, imported in 2023.
However, the European Union (EU) has recently introduced a series of sanctions targeting the Russian LNG sector. These sanctions include proposals for banning the re-loading of Russian LNG within EU borders and imposing restrictions on new investments, technology provisions, and services by EU operators for upcoming Russian LNG projects, the presentation notes.
These measures extend the scope of existing sanctions imposed by both the US and EU, which have targeted suppliers and shareholders involved in projects like Arctic LNG 2. The Arctic LNG 2 project, in particular, has encountered setbacks, primarily due to a shortage of ice-classed liquefied natural gas carrier (LNGC) tonnage. However, Oystein Kalleklev stated that they do not expect Russia will not move on with the project.
Originally intending to build 21 Arc7 vessels, the project has been forced to suspend production. Russia’s inability to construct or charter the necessary tonnage capacity for its LNG projects raises concerns about potential ramifications.
As Flex LNG highlights, one notable consequence could be an increased demand for existing vessels already in operation, potentially leading to the emergence of what some industry observers have termed an “LNG dark fleet.”
We do think that the Russians plan on doing something similar as we’ve seen on the oil and petroleum side
… said the CEO
A continuously growing fleet of tankers, mainly older ships, including some that have not been inspected recently and which have substandard maintenance, unclear ownership and lack of insurance, are being operated as a “dark fleet” to circumvent sanctions.
