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Factbox: Russia-UK energy ties face strain over poisoning scandal

London (Platts)--13 Mar 2018 156 pm EDT/1756 GMT


The Russia-UK poisoning row threatens to put renewed strain on the two countries' deep-seated energy ties, illustrated by some of the first ever LNG shipments from Russia's vast new Yamal LNG facility now arriving in the UK.


  • BP, Shell defend Russia positions
  • Russia ships first Yamal LNG cargoes to UK
  • History of commercial, political tension

The UK has yet to announce steps against Russia following this month's poisoning in the city of Salisbury, allegedly involving the use of a Russian nerve agent. But energy ties between the two countries are deep as well as fraught, and likely to weigh on the political calculus.

The UK is less dependent than much of Europe on direct Russian energy supplies. But Russia's new LNG shipments - the first was offloaded at the Isle of Grain in Kent in December before being reshipped to the US - underline Russia's role as chief energy supplier to Europe.

UK companies have long defended their own ties with Russia, which range from BP's collaboration with Rosneft, to Shell's role in the Nord Stream pipeline expansion.

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Here we outline some of the main energy ties:


UPSTREAM COLLABORATION


BP and Rosneft work alongside each other at the Taas Yuryakh oil field and on exploration with service giant Schlumberger. They cooperate overseas, at Egypt's Zohr gas project, and have signed a number of mid-stream oil and gas supply deals.

BP chief executive Bob Dudley made Russia central to BP's strategy on taking over in 2010 despite his turbulent experience as head of joint venture TNK-BP, which at one point saw him flee the country.

TNK-BP was later folded into Rosneft, but BP ended up with a 19.75% stake in Rosneft and two seats on its board. Dudley has pointed to Russia's vast resources to argue for the need to remain closely engaged, something that appears to have carried weight in the UK.

Shell has kept a lower profile since being stripped of part of its stake in Sakhalin 2 in 2006, but Sakhalin, with its strategic location near Asian markets, accounts for 10% of Shell's LNG production, or 3 million mt annually. And Shell is helping finance the Nord Stream 2 pipeline expansion, with a commitment to invest Eur950 million ($1.2 billion), albeit without holding a stake.


ENERGY TRADE


The UK's North Sea industry and access to international markets limits its dependence on Russia, although it does receive periodic supplies of Russian oil, gas and coal.

One of the first LNG shipments from the Yamal LNG project was offloaded into the UK gas network, in January, but so far Northwest Europe has mostly acted as a trans-shipment point for onward export of Yamal LNG cargoes.

Russia accounted for roughly 50% of UK steam coal imports in the first nine months of last year.

London hosts the headquarters of Gazprom Marketing and Trading, which handles the Russian giant's global trading of oil, LNG, power and carbon as well as currency deals.


FINANCIAL MARKETS


Numerous Russian companies are listed on the London Stock Exchange, from Rosneft's global depositary receipts to small independent producers.

EU sanctions limit Russian companies' ability to raise debt in London, something the Russian industry has adapted to, for example securing Chinese financing in the case of Novatek's Yamal LNG development.

--Nick Coleman, nick.coleman@spglobal.com
--Edited by Jonathan Dart, newsdesk@spglobal.com




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