Ensuring a leading position in the exploration and development of the Arctic’s huge gas deposits has long been a key part of President Vladimir Putin’s overall vision to project the power of his new Russia. Not only has it allowed Russia to dramatically increase its liquefied natural gas (LNG) output – finally in line with Russia’s status as an oil and gas superpower, as Putin sees it – but it has also allowed Russia to become the key gas supplier to China in the future. With Russia’s presence in the Arctic gas sector now extremely substantial, it was only natural to expect a corollary roll-out of development of the oil sector, and this is precisely what is now underway.
Last week saw Russia’s Gazprom Neft, the country’s third biggest oil company by output and the oil arm of state gas giant Gazprom, ship its first cargo of oil produced in the Arctic to China via the Northern Sea Route (NSR). This shipment East adds to its existing Western exports via the NSR to Europe. According to Gazprom Neft, it took 47 days to deliver a full cargo of 144,000 tonnes of sweet, light Novy Port oil from the Yamal peninsula developments to the Chinese port of Yantai on the Bohai Sea, from Russia’s north-western city of Murmansk. “Successful experience in the sale of Arctic oil in the European market and an in-depth insight of Asia-Pacific markets allow Gazprom Neft to offer Novy Port oil with a unique year-round logistics scheme to Asian partners,” said Gazprom Neft’s deputy director general for logistics, processing and sales, Anatoly Cherner, last week.
The NSR saw its first trial voyage (from the Far-Eastern Russian port of Vladivostok via the East Siberian and Laptev Seas, to St Petersburg) by a large-sized and strengthened container ship only as recently as August 2018. Since then, its development as a key transport route for Russian hydrocarbons to the East has run alongside the earlier developments of Russia’s number two gas producer (after Gazprom), Novatek, in its Yamal-centred LNG projects, that now uses it to deliver cargoes both East and West. After the very slick management at Novatek had delivered each stage of its Yamal Peninsular (Yamal LNG) project on budget and on time – despite the full weight of U.S. sanctions being imposed on Russia in 2014 as a result of its annexation of Crimea – until the delay to the fourth train announced last year, Gazprom and Gazprom Neft were bound to follow. Related: Mexico’s Pemex Scrambles To Save Itself From Oil Price Crash
Much more is to come from Gazprom Neft, which started exporting oil produced in Russia’s Arctic exploration and development region in 2013, and which has delivered at least 40 million tons of oil – including both the ARCO (Prirazlomnoye field) and Novy Port (Novoportovskoye field) blends – to various European countries since then. In broad terms, the Novy Port oil field is one of the largest oil and gas condensate fields in the Russian Arctic, with at least 250 million tons (around 1.8 billion barrels) of reserves. Using a now proven system…