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Novatek plans Arctic shipping route

LNG Industry,

Novatek’ Chief Financial Officer Mark Gyetvay announced at the International Petroleum Week Conference in London, that Novatek plan to send a very large LNG tanker from their Yamal peninsula fields to the Asian markets via the Arctic Ocean.

They plan to apply to Sovkomflot, the state oil-shipper, for subsidised assistance in the venture, but if successful, it would mean massive transport savings and reduced CO2 emissions. By using the Northern Arctic route, Novatek would effectively cut 4000 nautical miles off the usual 11 000 nautical mile journey via the Suez canal to the Asia-Pacific region.

If successful, this could open up the Arctic region to further exploitation by oil and gas companies. Novatek only announced in early February the creation of a joint venture with Total, for the exploration and development of the Termokarstovoye gas condensate field, in the Yamal-Nenets Autonomous Region, Russia’s Arctic region. The field’s reserves are estimated at 396.8 million bbls of oil, and 10.3 million t of liquid hydrocarbons. With such vast reserves it is no wonder that they are pushing to find new routes to get the gas to the new Asia-Pacific markets.

Climate Change
Currently, there is an element of seasonality to the Arctic sea route, the Northern sea route along the coast of Siberia is normally only open for six to eight weeks a year, and Novatek believe they will only be able to ply the route for three to four months a year. However, last September, two German cargo vessels made the journey from Siberia to South Korea through the Arctic Ocean without the need for any icebreakers. This decrease in sea ice has been blamed on global-warming; the Circumpolar Flaw Lead System Study, a research unit investigating the thinning of the Arctic ice has predicted that between 2010 and 2030, the Arctic could be completely free of ice, if such predictions come true, the Arctic Ocean could become a major shipping route.

Foreign Investment
Vladimir Putin has called for foreign energy majors to invest in long-term partnerships, to exploit the vast resources of the Arctic peninsula of Yamal. However, despite this message, foreign investors have been put off by the intense resource nationalism his regime has promoted.

Currently, TNK-BP is being threatened with having its license to develop the Kovykta field in east Siberia revoked, ahead of negotiations on a potential sale of the field to a state-owned rival. They had agreed to sell the field two years ago to Gazprom after a similar wave of threats, but the deal broke down over price negotiations. It is this kind of pressure to force concessions that led to Royal Dutch Shell selling up its Sakhalin 2 oilfield to Gazprom in 2006, and it is not likely to attract further foreign investment.

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