High summer is when thoughts turn to the prospects for opening Russia’s northernmost waters to commercial shipping – and in particular to LNG, as Asia remains the world’s largest import market.
In July and August, as the ice melts and thins, the northern sea route is at its most accessible. Yet so far, the Northern Sea Route Information Office Centre for High North Logistics (CHNL) tells LNG World Shipping, no LNG carrier has booked a transit this summer.
No LNG carriers transited the northern sea route last year or the year before. This begs the question whether this new route – a route that promised to cut sailing times between Europe and Asia by up to a third – will prove to be the LNG shipping game-changer that so many anticipated.
Earlier this week, Russia loaded its first oil-tanker shipment from Arctic Gateway on the Yamal Peninsula. Asia is a key market as Russia ramps up its oil exports.
And next year, if all goes to plan, the US$27 billion, 16.5 million tonne a year (mta) Yamal LNG project will load its first cargoes of chilled gas. Shipowners Sovcomflot, Teekay LNG, Dynagas and Mitsui OSK have ordered fifteen ice-class LNG carriers to deliver those cargoes to market.
These ships are tailor-made to unlock Arctic Russia’s frozen waters – and here, again, Asian demand will be key.
Russia is working hard to promote the northern sea route. News emerged earlier this week that South Korea is testing shipments through the northern sea route, chartering the heavylift vessel Happy Dover to deliver chemical reactors bound for Kazakhstan to the port of Sabetta in the Russian Arctic, for onward delivery by river barge.
Moscow, which has lobbied for months to persuade Seoul-based shipping companies to use the northern sea route, sees this shipment as an important test case. As a relative latecomer to LNG exports, Russia is doing everything it can to shore up its position – and increasing its share of global shipments is part of that plan.
So will we see a flurry of LNG shipments across the Russian Arctic – if not now, then further down the line? One issue is the fact that Asia’s largest buyers are over-contracted and want to resell surplus cargoes to buyers in Europe and Latin America.
That could mean that cargoes purchased for Asia will not now travel to Asia. And growth in intra-regional trades at the expense of global trades may also dent the business case for shipping gas through the high Arctic.
Even CHNL has its doubts. A Murmansk-based spokesman tells us: “We think there will be an increase in LNG transportation from the Russian Arctic when the Yamal LNG project starts production in 2018.
“In the winter time, we believe all LNG carriers from Yamal will go west to Zeebrugge LNG terminal while in summer some of the vessels could go east via the northern sea route. When it comes to LNG transportation from Europe to Asia, we don’t expect it will increase soon.
“We think that NSR remains an alternative route, which can be efficiently used depending on market and ice conditions.”