News review of the events on the NSR
#2 May 2019

1. Cargo volume on NSR is growing

According to the public declaration of the key goals and priorities of the Ministry of Transport of the Russian Federation for 2019, the cargo volume on the Northern Sea Route is constantly increasing. So, by the end of 2018, it amounted to 20.2 million tons, which is two times more than in 2017.

According to the plans of this year, 26 million tons of cargo will be transported via the Arctic seas. As for forecasts for the coming years, according to the Comprehensive Plan for the modernization and expansion of the backbone infrastructure of the Russian Federation, by 2021 the traffic volume along the NSR should increase to 51 million tons, by 2024 – to 80 million tons.

2. Sovcomflot orders from Zvezda four more gas carriers for Arctic LNG 2

The shipping company Sovcomflot and the Far Eastern shipyard Zvezda are planning to sign a contract for the construction of four gas carriers of Arc7 ice class to export liquefied gas from the Arctic LNG 2 project. According to the information leaked to the Russian press, these vessels should be delivered to the customer by 2025.

The contract for a pilot gas carrier between the shipyard and the shipping company was entered in April of this year. Also Sovcomflot and NOVATEK signed a charter agreement for 25 years. The vessel should be ready before the end of 2022 and finish ice trials no later than April 2023. That is, the delivery of the ship must obviously go in sync with the launch of the first line of the Arctic LNG 2.

The estimated cost of construction of 15 gas carriers of the Arc7 ice class at Zvezda shipyard is about $ 5 billion. It is assumed that the government will allocate subsidies to shipbuilders, the size of these subsidies will not exceed 20% of the cost of building ships of this class in South Korea. According to the Ministry of Industry and Trade of the Russian Federation, the cost of building a single gas carrier at Zvezda will be $ 375.6 million, with the price of work in South Korea at $ 324.4–330 million.

At the same time, it is still not clear whether 15 gas carriers will actually be built. If it is ordered less, then the cost of each gas carrier may increase.

3. NOVATEK’s third LNG plant will be launched in 4 years

Russian gas company NOVATEK expects to start production of LNG at the Ob LNG plant in the fourth quarter of 2022. It may become the third LNG project of NOVATEK after the already launched projects Yamal LNG and Kriogaz-Vysotsk. The capacity of these projects is 16.5 million tons and 600,000 tons per year. This was announced by the general director of the company Vladimir Khurtin.

The Ob LNG project includes the construction of three processing lines with a capacity of 1.6 million tons of LNG each year. The first line is supposed to start at the end of 2022, the second and third in the II and III quarters of 2023.

The Ob LNG will be located in the area of the Sabetta port, where the Yamal LNG plant is already operating. But in contrast to it, built entirely under foreign technology, the new one is being created on the basis of the “Arctic Cascade” liquefaction technology developed on the order of Novatek. It is also planned to build on this basis the fourth technological line of the Yamal LNG plant with a capacity of 950,000 tons per year.

The resource base for the Ob LNG should be the Verkhnetiuteyskoe and Zapadno-Seyakhinskoe deposits. Their total reserves are 157 billion cubic meters of gas, the license for their development will end in 2044. NOVATEK has not yet released the possible cost of the Ob LNG. It will be formed when making the final investment decision.

At the same time, it is already known that Ob LNG will not be the last project of NOVATEK in the Arctic. The construction of a large Arctic LNG-2 plant with a capacity of 19.8 million tons will begin. It is planned that the first stage of this project will be commissioned in 2023. The cost of the Arctic LNG-2 is estimated at about $ 20–21 billion. For comparison, the first plant Yamal LNG cost Novatek and its partners $ 27 billion.

4. Year-round navigation can begin on eastern part of NSR in 5 years

The construction in Russia of a large number of gas carriers with high ice class and a transshipment terminal for LNG products in Kamchatka makes possible the rapid development of the eastern direction of the Northern Sea Route. What it involves is the passage of ships first via the Kara Sea, then the Laptev Sea, the East Siberian and Chukchi Seas with access to the Pacific Ocean through the Bering Strait. This direction captures partly the western and the entire eastern area of the Arctic, which is much more difficult to master and much less accessible.

For the gas carriers, this route along the NSR will end on the east coast of Kamchatka. Novatek together with French Total and other partners is building a huge transshipment terminal for the products of its Arctic LNG plant in the Bechevinskaya Bay.

The appearance of this terminal will allow to finally optimize the transport logistics in the delivery of LNG to consumers in Asia and solve the main “eastern” project task: to create a new independent center for pricing of liquefied natural gas in the Asia-Pacific region on the basis of the terminal.

For this purpose, at the end of 2018, NOVATEK signed a preliminary agreement with Zvezda shipyard for the construction of 15 gas carriers of the Arc7 ice class for the Arctic LNG-2 project. In addition, in this summer, Sovcomflot is going to enter an agreement on the construction of 4 more gas carriers on Zvezda shipyard.

A round voyage of Arc7 ice class ships from Yamal to Kamchatka will take about 25 days without even taking into account assistance of icebreaker Leader, which is expected to be commissioned only in 2027. When the Leader starts to work, the speed of gas carriers will increase to 10-12 knots per hour.

As a result, by the second half of the next decade, it will be possible to speak about the complex commercial exploitation of one of the most attractive sea routes around the Eurasian continent.

5. Russian autonomous station for monitoring subglacial situation in Arctic

P.P.Shirshov Institute of Oceanology of the Russian Academy of Sciences (RAS) began the development of an autonomous ice station intended for monitoring the marine environment, meteorological conditions, as well as preventing natural disasters and man-made disasters in the Arctic. During the long polar night, the device will automatically measure the vertical profiles of current speed, temperature and salinity of water, as well as ice thickness.

Monitoring data obtained promptly via satellite communication channel can be used to prepare diagnostic and prognostic materials for hydrometeorological services for marine activities, for scientific research and forecast of the state of the natural environment of the Arctic Ocean.

As explained by Alexander Ostrovsky, Head of the Ocean Acoustics Laboratory of the IO RAS, autonomous ice stations will also be used to monitor natural and man-made anomalies, prevent natural disasters and man-made disasters. This system will become the prototype of the Russian drifting ocean ice stations, which will provide operational monitoring of the state of the marine environment of the Arctic waters, including along the Northern Sea Route.

6. Nuclear icebreaker “Ural” launched in St. Petersburg

On May 25, a launching ceremony of the second universal nuclear icebreaker “Ural” took place. The ship of project 22220 is being built by Baltic Shipyard on the order of Rosatom.

The launch of “Ural” icebreaker was carried out with an already installed two-reactor power plant with the main source of steam from the new generation reactor plant. Its technical parameters make it possible to increase the operation time of the icebreaker without recharging up to 7 years or more.

When building new nuclear icebreakers, special attention is paid to safety issues. On nuclear ships of project 22220, each reactor is housed in its autonomous protective sheath and ensures the operation of the power plant at the required power level regardless of the state of the other reactor. This guarantees maximum protection for the crew and the environment”, said Mustafa Kashka, General Director of Atomflot FSUE.

At present, construction of the head universal nuclear icebreaker “Arktika” and the nuclear icebreaker of project 22220 “Sibir” are underway in St. Petersburg. They will be used to provide large Arctic projects in Russia.

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