Russians to Send Oil to China via Northern Sea Route

Apr. 21 – OAO Sovcomflot, Russia’s largest shipper, and OAO Novatek will send 3-4 cargo of gas condensate on a second voyage across the so-called Northern Sea Route rather than the Suez Canal, a senior Sovcomflot official said on Wednesday.

Last August, Sovcomflot shipped a high-tonnage Aframax tanker with 70,000 metric tons of condensate cargo along the Northern Sea Route for Russia’s largest independent gas producer Novatek in the first ever voyage by a large vessel along the route.

“We are planning to ship between 300,000 and 400,000 tons this year,” he told reporters on the sidelines of a conference on the Russian Arctic.

Each 100,000-ton cargo of stable gas condensate will be shipped between the warm-weather months of July and November, when the ice cover is more manageable, he said.

Earlier in February 2011, Nikolai Kolesnikov, Sovcomflot executive vice president, said that they “want to make a similar trip, but using a Suezmax vessel this summer,” added that the route would have to be slightly altered to account for shallow waters in the East Siberian Sea.

The route through the Arctic sea and the Bering Straits cuts the distance to the as yet unidentified port in China to 7,000 nautical miles from the 11,000-mile journey via the Suez Canal.

The tanker, escorted by a nuclear ice breaker, arrived in the Chukotka region in the Eastern part of the Arctic Ocean 13 days later. From there, it was shipped south to the Chinese port of Ningbo.

“After the voyage, the tanker went into repairs,” Ambrosov said, later adding that the repairs were planned rather than a result of the voyage.

“It (the cost) is about the same as what they (Novatek) would pay to go through the south, through the Suez Canal, a little more,” Ambrosov said.

“There is no commercial sense because the rate to ship along the Northern Sea Route is higher. This is because rates for the tanker, the rate for the ice breaker, they come out to be more expensive.”

He also said that shipping via the Northern Sea Route is a more expensive, but less-time consuming way to ship to Asia than through the Suez Canal.

Commenting on costs, SCF Sovcomflot’s Deputy General Director Igor Pankov agrees that these days a passage through the Suez Canal costs less than a Northern Sea Route trip ice-breaker assistance fee.

“But when time and fuel savings are taken into account, the picture changes. Density of the traffic is also important: the more ships we have sailing the Northern Sea Route, the cheaper each voyage becomes,” Pankov concludes.

Russia is seeking to tap Asian demand for oil and gas to help justify developing remote deposits in the Arctic and eastern Siberia. The country is building an oil pipeline to the Pacific and may construct a natural-gas link to China. OAO Gazprom, the gas export monopoly, began producing liquefied natural gas, fuel cooled for shipment by tanker, in Russia’s Far East in 2009.

Novatek, Russia’s second largest gas producer, is testing shipments in the Northern Sea Route as part of its plans for the future Yamal LNG project in northern Russia.

The company plans to produce up to 16 million tons of frozen gas a year by 2015-2017, surpassing Sakhalin-2, which is led by Gazprom and has an annual capacity of 9.6 million tons.

Sovcomflot estimates shipments from Yamal to the Bering Straight between Russia and Alaska would take eight days.

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