Asia LNG Market Update: Russian Decree No. 416

July 2022
Region: Asia Pacific

On 30 June 2022, the Russian Federation issued Presidential Decree No. 416, which asserts governmental control over the Sakhalin-II oil and gas export facility.

Russia’s issuance of Decree No. 416 comes directly on the heels of various market events that have intensified existing global gas market tensions. In recent weeks, the market has been forced to react to, and absorb the effects of: (i) a fire at the Freeport LNG facility in the United States (causing major LNG supply disruptions, anticipated to last until later this year); (ii) a sharp reduction of Russian gas supplies to Europe; (iii) a further anticipated curtailment of Russian supplies due to maintenance on the Nord Stream pipeline; (iv) significant ongoing heat waves in Japan and Europe increasing energy demand; (v) the impact of sanctions on Russian shipping vessels; and (vi) rising spot market prices. While the long-term effects of Decree No. 416 remain unknown at this time, in the near term at least, Decree No. 416 can be anticipated to exacerbate these and other prevailing market pressures. This is likely to create additional uncertainty and concerns for market participants who continue to grapple with severe price volatility and concerns regarding supply.