Russian, U.S. LNG heads for Europe as Asian prices weaken

(Adds detail on LNG trade economics, tightening Europe-Asia

spread, cargo arrivals)

By Oleg Vukmanovic

LONDON, March 15 (Reuters) - Falling Asian gas prices are

reigniting interest in northwest Europe as a liquefied natural

gas (LNG) destination following winter shortages as Russia and

the United States step up deliveries.

Price swings prompted Royal Dutch Shell (LSE: 0LN9.L - news) on Thursday

to divert the first shipment from the new Cove Point export

plant in the United States away from Asia to Britain.

More supply from Russia's newly built plant in Siberia at

Yamal is likely to be absorbed by northwest Europe as arbitrage

opportunities with Asia dry up amid a post-winter price slump

there, trade sources said.

Asia's spot LNG premium over European gas hubs has shrunk to

around $1 per million British thermal units, driven by divergent

weather patterns.

Mild weather is sapping demand in major LNG consumers China

and Japan as cold blasts depleted Europe's gas inventories.

Tighter spreads limit traders' ability to divert

Atlantic (Shanghai: 600558.SS - news) -produced supply east after shipping costs rose last

year.

For example, a cargo held in storage at Rotterdam's Gate LNG

terminal has gone unsold due to diminished incentives, traders

said.

So far this year, two Yamal cargoes unloaded at British

terminals for domestic consumption, accounting for about a third

of Britain's 2018 LNG imports after typical supplier Qatar

pre-sold the bulk of its winter output to Asia last year.

Qatari LNG shipments to northwest Europe should also pick up

from April as Asian demand eases, traders said.

A Norwegian shipment arrived in Britain last week.

From April, the availability of Yamal LNG cargoes may be

restricted as long-term contracts commence. Currently all Yamal

LNG is sold via spot markets.

Under long-term deals, destination restrictions may limit

where Yamal's customers - PetroChina (HKSE: 0857-OL.HK - news) , Russia's Novatek, Spain's

Gas Natural (Frankfurt: 38G.F - news) , France's Engie (LSE: 0LD0.L - news) , trader Gunvor and Shell (LSE: RDSB.L - news) - can sell

supply.

Curbs will vary by contract but traders still expect a large

chunk of volumes to flow into European terminals - where they

can then be re-exported - until thawing ice sheets allow passage

to Asia directly in the summer months.

In Britain, Russian LNG deliveries have drawn scrutiny after

Prime Minister Theresa May accused Moscow of poisoning a Russian

ex-spy with a rare nerve agent in England.

"We estimate less than 1 percent of our gas comes from

Russia and are in no way reliant on it," a spokeswoman for the

Department for Business, Energy and Industrial Strategy said.

British utility Centrica (Frankfurt: A0DK6K - news) has a contract with the trading arm

of Russia's Gazprom for 4.16 billion cubic metres a year until

2021, but that gas does not necessarily come from Russia and is

most likely sourced from the open market.

(Additional reporting by Susanna Twidale; Editing by Dale

Hudson)