News review of the events on the NSR
#1 April 2019

1. The Russian Government looking for money to build the second terminal in Sabetta

During the International Arctic Forum in St. Petersburg, the Minister of Transport of Russia, Evgeny Ditrikh, said that there was a search for financing a number of issues for the development of the Northern Sea Route.

“Today the federal project for the development of the Northern Sea Route has been approved, all its parameters have been defined. We are not looking forward to any great innovations, but there is a number of issues related to the financing of the project, we are solving them now. The project is developing in the schedule.” – Ditrikh explained to reporters.

Most likely, we are talking about the instruction of President Putin made in March: to provide funds from the budget for 2020–2022 for the construction of the LNG terminal “Utrenniy” in the Sabetta port, as well as for dredging there this year.

Novatek Company needs this terminal for the Arctic LNG-2 plant, where it is planned to produce a total of 19.8 mln t of LNG per year.

Deputy Prime Minister Maxim Akimov explained in an interview with news agency RIA “Novosti” that the cumulative investment in the LNG terminal “Utrenniy” will amount to more than 150 bln rubles, among them 112.1 bln will be from the budget. The Cabinet of Ministers expects that the pool of private investors will invest about 40 bln rubles the in infrastructure.

As is known, in May 2018, Russian President Vladimir Putin ordered to increase the traffic on the Northern Sea Route to 80 mln tons by 2024. If the new terminal is built, only Novatek Company promises to ensure the traffic volume on the NSR to 46.5 mln tons by the mid-2020s.

2. Rosatom predicts growth of cargo volume on NSR to 120 million tons

The head of the Russian state corporation Rosatom, Alexey Likhachev, expects that by 2024 the cargo traffic on the Northern Sea Route will reach 92.6 million tons; among these, 23 million will be accounted for coal and 41 million – for gas.

Such confidence is based on plans for building a nuclear icebreaker fleet. There is already a decision of the Russian government to build the fourth and fifth universal nuclear icebreakers of the project 22220.

Together with icebreakers “Arktika”, “Sibir” and “Ural” that are already under construction, as well as “50 let Pobedy” icebreaker, which is working, and “Lider” icebreaker being designed, they will form a fleet that makes it possible to use the Northern Sea Route all year round.

“By 2030, we plan to reach the level of 110-120 mln tons of cargo, and this is only in the east direction,” Likhachev said during the International Arctic Forum in St. Petersburg.

Leonid Mikhelson, Chairman of the Board of Novatek Company, expressed confidence in the need to speed up the signing of contracts for the construction of the fourth and fifth icebreakers of the project 22220. If it is done quickly, this can allow consider icebreakers commissioning in 2024-2025.

“I think only in this case we can start year-round navigation as scheduled. This is important to do against the background of growing fuel consumption in the Pacific region. According to our estimates, the Arctic region is capable of producing up to 140 million tons of gas per year,” said Mikhelson.

In the meantime, new ships have not been built, it has been decided to extend the operational life of reactor units of operating nuclear-powered ships again. Due to this, the icebreakers “Taimyr” and “Vaygach” will work until 2025–2027, “Yamal” until 2030, and “50 let Pobedy” until 2039. That is just before the time when new icebreakers will be commissioned.

3. Sovcomflot and Zvezda signed contract for construction of the first gas carrier

A new vessel will be built specifically for the project “Arctic LNG” (belonged to Novatek Company). The shipyard “Zvezda” is obliged to hand over the vessel until the end of 2022. Ice trials must be completed not later than April 2023. Thus, the delivery of the gas carrier should occur simultaneously with the implementation of the new line “Arctic LNG”. The company can reduce the haul distance where  expensive gas carriers Arc7 are used and optimize their number, taking into account the permits obtained by Novatek for the use of vessels under a foreign flag, as well as the launch of terminals in Kamchatka and the Murmansk region,.

4. Novatek will transfer LNG transshipment from Norway to Russia

The transshipment of LNG, which the Russian Company Novatek organized in 2018 off the coast of the Norwegian town Honningsvåg, will be transferred to Kildin Island, which is 60 km from Murmansk. This news was published by the Russian newspaper “Kommersant”.

Novatek confirmed that they are engaged in designing transshipments in the Murmansk region. Their structure will include transshipment of gas delivered from Siberia from small tonnage tankers to large ones via a barge by analogy with Kamchatka and anchorages for transshipment according to “board-to-board” scheme, as in Norway.

It is very important that for the implementation of transshipment in the Murmansk region does not need a special infrastructure. Novatek have already acquired isothermal hoses and special fenders. For transfer “board-to-board” also need tugs, which are available in Murmansk in sufficient quantities.

“Initially, the permit for LNG transshipment in Honningsvåg was obtained for a period up to June 2019. Extension of the permit may be difficult, since the transshipment of Russian LNG in Norway irritates the United States. The decision to transfer the transshipment point to the Russian water area makes the development of the transshipment project more predictable,” said Mikhail Grigoriev, head of the Consulting Center “Gecon”.

The Ministry of Transport of Russia has already approved the new scheme, but the company still have to negotiate with the Ministry of Defense, since the bases of the Northern Fleet are located on the coast of the Murmansk region. If the military bodies quickly give permission, the transshipment on the Russian territory can begin as early as October 25.

Let’s remind, this scheme is temporary. It will operate until the commissioning of a permanent terminal for the transshipment of LNG in the Kola Bay, which Novatek has already announced.

5. Total invests in Novatek terminals

The French oil and gas company Total has confirmed its intention to join the shares of the Russian company Novatek in the construction of two LNG terminals in north-west and east Russia.      

“We are investing in “Arctic LNG-2”, but we will also invest in Novatek projects in Murmansk and Kamchatka,” Patrick Pouyanné, the head of the French company said a few days ago.

Investments in “Arctic LNG-2” project, which are referred to, are the purchase in March of this year of 10% of the project from Novatek. During the transaction, a problem arose on the part of the Federal Antimonopoly Service, which considered that the actions of Total fall under the federal law on foreign investments. But then they were resolved.

6. New Russian icebreakers can get a single functionality and equipment

During the International Forum “The Arctic – Territory of Dialogue” in St. Petersburg, the general director of Rosatomflot, Mustafa Kashka, took the initiative to develop common approaches to the functionality and equipment of newly built icebreakers and suggested that specialized research organizations should be commissioned to develop common requirements for size and characteristics ships.

According to Mustafa Kashka, icebreakers built in Russia over the past 10 years have too wide range of characteristics, and it is important to use a differentiated approach in creating new vessels.

Among only technical solutions is the need to determine in advance whether the icebreaker needs to function as a rescue vessel? In other words, should it be able to carry out oil spill response and towing of vessels in distress, have helipads and medical complexes.

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