Russia Opens Up Northern Sea Route For Gas Supplies To Asia

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russian-shipThe development of the Arctic Northern Sea Passage has taken a major step forward with the Russian supertanker Christophe de Margerie en route to South Korea. Sailing the Northern Sea Route with a load of liquefied natural gas from Norway, the shipment is a major step for Russia’s Sovcomflot to enter the global gas transportation market. Sovcomflot has 128 tankers and 13 LNG transport ships. This is about four percent of the global gas transporting fleet, however Russia’s share of this market is currently increasing. It means that Russia was now pitching itself as an important transporter of European gas to Asia.

The Christophe de Margerie does not need icebreakers to sail along the Northern Sea Route as it is able to cut through two meters of pack ice. Additionally, Russian companies intend to add value to raw gas. Gazprom has announced it is to build an LNG plant on Sakhalin Island in the Russian Far East as well as a facility in the Baltic Sea.

The Northern Sea Route cuts the travel time from Europe to Asia by a hefty 40 percent and the Christophe de Margerie will cover this distance in just 15 days. Yamal LNG will start sending liquefied gas via the Northern Sea Route before this year is out, and by 2019 it is set to become the biggest liquefied natural gas producer in the world. LNG producing and transporting facilities will become a useful addition to Gazprom’s plans to build Nord Stream 2 and other gas pipelines. LNG is cheaper to supply to South Korea and other Asian countries, including China with no pipeline links to gas producers. Average gas prices in Asia are higher, which explains why most of the globally-produced LNG is going to Southeast Asia.

Russian tanker companies are all set to continue their mutually-beneficial cooperation with EU countries. Norway’s Statoil is currently working with Russian oil and gas companies in the Barents and Okhotsk Seas and also in the Russian North. Russia’s Rosneft is also joining a consortium of Norwegian oil and gas project in the Northern Sea and the Norwegian sector of the Barents Sea. However, there are question marks  concerning Statoil and whether it will keep working with Russian companies now that US President Trump has approved a new round of sanctions against Russia.

Russian opinion concerning the recent round of sanctions imposed upon it are that these are dressed up as anti-Russian measures in order to promote the sale of US Gas to Europe, despite the fact it is more expensive. The new sanctions are largely aimed at Russia’s oil and gas industries and appear designed to have impact upon the functionality of the Russia to EU Nord-Stream pipeline, thus paving the way for presenting American gas as an alternative to Russian gas to the EU market.

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