Spain urges LNG importers to decline new LNG contracts with Russia

Stephen Stapczynski, Thomas Gualtieri and Anna Shiryaevskaya, Bloomberg March 24, 2023

(Bloomberg) – Spain, the biggest European buyer of liquefied natural gas (LNG) from Russia, is urging importers not to sign new contracts with Moscow as it seeks to cut ties following the invasion of Ukraine.

LNG importers in Spain received a letter from the government recommending that companies don’t sign up to new purchases from Russia, according to people with knowledge of the matter. The Spanish government’s request isn’t binding as there are no sanctions in place, and only refers to signing new contracts, according to the people who declined to be named because the matter is private.

Naturgy Energy Group SA, Repsol SA, TotalEnergies SE, Axpo Holding AG, Pavilion Energy, Enagás SA, Met Energy, Enet Energy, Energias de Portugal SA, Compañía Española de Petroleos SA and BP Gas & Power Iberia were sent a letter on March 14 by Deputy Prime Minister Teresa Ribera, who’s in charge of Spain’s energy policy.

The letter, seen by Bloomberg News, doesn’t explicitly mention spot contracts but makes a general plea to “intensify the diversification of supply of liquefied natural gas and do without those from Russia.” Ribera, who’s also environmental transition minister, confirmed in an emailed response to Bloomberg questions that she sent the letter 10 days ago and several companies replied.

Axpo, Repsol and Enagás responded to the notification saying they’re not purchasing LNG from Russia, according to a spokesperson of the ministry.

Europe’s pipeline gas flows from Russia have fallen to historic lows since the Kremlin’s invasion of Ukraine last year. To make up for the shortfall, LNG shipments from all over the world have surged — including from Russia — and aren’t subject to any EU sanctions.

Still, the UK and the Baltic countries already stopped Russian LNG purchases. Spain has almost doubled imports of Russian LNG since the outbreak of the war in Ukraine last year, highlighting how dependent Europe still is on Moscow.

The European Union’s energy chief Kadri Simson earlier this month urged these shipments be stopped, saying companies should not renew long-term contracts once current ones end. She didn’t announce any specific measures.

Spain is the EU’s top buyer of Russian LNG so far this year, ship-tracking data on Bloomberg show. The country was forced to seek additional purchases last year after shipments from longstanding gas supplier Algeria declined following a diplomatic feud between the two nations.

Spain only receives Russian gas as LNG, as its utility Naturgy Energy Group SA holds a 20-year contract to purchase the fuel from Yamal LNG in the Arctic until 2038. The company declined to comment.

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