Russia has been driving forward measures that will increase its use of the Northern Sea Route (NSR) for its burgeoning exports of LNG and condensate cargoes.
The Russian government has given security to the 28 ships serving the Novatek-led Yamal LNG project and nudged its Kamchatka Peninsula storage hub forward. But the moves have still left the field wide open as to the type and number of vessels that the company needs to develop its Arctic 2 project.
Industry officials working with the Yamal project say the Russian government’s recent decree naming 28 foreign-flagged LNG carriers, which will be allowed to ship gas and condensate, is limited to vessels serving the port of Sabetta on the Yamal Peninsula.
The decree stated that the LNG carriers, which are time-chartered for at least 15 years, will be allowed to trade until 30 December 2043. It also detailed that any foreign-flagged vessels time-chartered for no longer than six months can ship product from Sabetta until 31 December 2021.
It provides a “safenet for Sabetta”, one industry figure said.
But the same officials point out that Arctic 2, which is due to be sanctioned in December, will be based on the Gydan Peninsula to the east of Yamal, and will not ship its cargoes from Sabetta.
One official said that at present, the project will still need its own fleet of specialised Arc7 ships. However, the number of vessels that will be required remains unclear because the fleets for the two projects are expected to be pooled to optimise shipping for the two neighbouring Arctic-based projects.
The situation is further confused by Russia’s stated intention that its Zvezda Shipbuilding complex in the Far East will build the LNG carriers for Arctic 2.
Russian shipowner Sovcomflot (SCF Group) is already working on the shipbuilding and time-charter contracts for the first of these with the shipyard.
South Korea’s three major shipbuilders — Hyundai Heavy Industries, DSME and Samsung Heavy Industries — are currently competing to become the technology partner with Zvezda for this next tranche of LNG vessels. A selection on a preferred partner is due to be made in June.
In addition to the cabotage decree, Russia aims to ship LNG via the NSR after giving approval to Novatek’s plan to build a terminal and storage hub in Bechevinskaya Bay on the Kamchatka Peninsula. Plans would see the large storage facility in operation by 2023.
Plans would see the huge storage facility in operation by 2023.
Sources told TradeWinds that this could entail the construction of two huge floating storage units of at least 360,000 cbm each or larger.
One source said the intention is to move LNG eastwards in convoys of vessels led by an icebreaker. A large storage capacity at the new base would be required to accommodate all the cargoes shipped, with the hub destined to provide onwards shipment to Asia.
But other observers in Russia say the Kamchatka project is likely to be some years away as it must wait for the planned delivery in 2027 of new, more powerful icebreakers that can keep the NSR open all year round.
At the western end of the NSR, Novatek is also developing a similar transshipment and storage hub at Murmansk, where it plans to carry out the operations that have been taking place over the past few months off Honningsvaag in Norway.
Those working on this project say less storage would be required in Murmansk as it is a shorter distance from Sabetta and Novatek has already proved that the transshipments from Yamal can be done throughout the winter months.
But they add that Russia is keen to see these ongoing cargo transfer operations switched to Russian waters at the earliest opportunity rather than pay out for them in Norway.
Shipping activity on the NSR rose in 2018, with about 18 million tonnes of cargo shipped along the route, up from 10.7 million tonnes in 2017. This is forecast to rise to 30 million tonnes this year.
Russian President Vladimir Putin has decreed that the NSR be developed to ship 80 million tonnes of cargo by 2025.