• 16 hours Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 17 hours Oil Gains Spur Growth In Canada’s Oil Cities
  • 18 hours China To Take 5% Of Rosneft’s Output In New Deal
  • 18 hours UAE Oil Giant Seeks Partnership For Possible IPO
  • 19 hours Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 20 hours VW Fails To Secure Critical Commodity For EVs
  • 21 hours Enbridge Pipeline Expansion Finally Approved
  • 22 hours Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 23 hours OPEC Oil Deal Compliance Falls To 86%
  • 2 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 2 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 2 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 2 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 2 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 2 days Aramco Says No Plans To Shelve IPO
  • 4 days Trump Passes Iran Nuclear Deal Back to Congress
  • 5 days Texas Shutters More Coal-Fired Plants
  • 5 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 5 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 5 days Chevron Quits Australian Deepwater Oil Exploration
  • 5 days Europe Braces For End Of Iran Nuclear Deal
  • 5 days Renewable Energy Startup Powering Native American Protest Camp
  • 6 days Husky Energy Set To Restart Pipeline
  • 6 days Russia, Morocco Sign String Of Energy And Military Deals
  • 6 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 6 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 6 days India Needs Help To Boost Oil Production
  • 6 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 6 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 6 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 6 days District Judge Rules Dakota Access Can Continue Operating
  • 7 days Surprise Oil Inventory Build Shocks Markets
  • 7 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 7 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 7 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 7 days Oil M&A Deals Set To Rise
  • 7 days South Sudan Tightens Oil Industry Security
  • 8 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 8 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
  • 8 days Indian Hydrocarbon Projects Get $300 Billion Boost Over 10 Years
Alt Text

Why Russia Is Playing All Sides In The Middle East

As the United States’ influence…

Alt Text

Half A Million Bpd At Risk From Geopolitical Firestorm

Geopolitical tensions are once again…

The Jamestown Foundation

The Jamestown Foundation

Founded in 1984, The Jamestown Foundation is an independent, non-partisan research institution dedicated to providing timely information concerning critical political and strategic developments in China,…

More Info

Sanctions Not Slowing Russian Arctic Ambitions

Arctic

The director of the Russian transport ministry’s Department of Maritime and River Transportation, Vitalii Klyuyev, spoke, on March 24, at the “LNG [liquefied natural gas] Bunkering Market as an Alternative” conference, in St. Petersburg. Klyuyev told participants that the world’s first LNG tanker specifically constructed for year-round Arctic operations, Sovcomflot’s $300 million Kristof de Marzheri, is scheduled to dock within days at the Kara Sea port of Sabetta, on the Yamal peninsula. Sabetta is the site of a massive LNG project owned by Novatek, Russia’s largest independent natural gas producer (Tks.ru, March 24).

After the Kristof de Marzheri completes its sea trials along the Northern Sea Route (NSR—the Arctic east¬–west maritime passage that hugs Russia’s northern coast), Sovcomflot intends to purchase additional tankers for transporting Novatek’s LNG exports. LNG tankers cost over three times more than a conventional oil tanker, and the Kristof de Marzheri’s Arctic modifications required still more investment. Thus, this vessel’s deployment is testament to the Russian government’s determination to develop its Arctic onshore and offshore hydrocarbon reserves, despite both the United States and the European Union imposing sanctions two years ago, many of which targeted specific technologies needed for this development.

Given their remoteness and harsh environmental conditions, transport by sea is an attractive option for most of Russia’s Arctic hydrocarbon deposits, particularly for LNG exports, which cannot be transported by pipeline. In 2011, the company Gazprom Neft initiated feasibility studies regarding the potential for exporting LNG from the Yamal-Nenets Autonomous Region by sea (Pravda, February 25, 2015). Once the studies proved that maritime LNG exports from Yamal were possible, Sovcomflot commissioned South Korean shipbuilder Daewoo Shipbuilding Marine Engineering (DSME), the fourth largest shipbuilder in the world, to construct the world’s first LNG tanker specifically designed to operate in the harsh Arctic conditions. DSME’s 172,600-cubic-meter Kristof de Marzheri, an Arc7 ice class vessel according to the Russian Maritime Register of Shipping (RMRS), will be able to navigate in ice fields of up to 6.8 feet (2.1 meters) thick (Korea.net, July 23, 2014). Related: Mysterious Outage In Libya Could Drive Oil Prices Higher

The Yamal developments underline the Russian government’s long-term efforts to develop its Arctic hydrocarbon reserves, which have been negatively impacted by both low global hydrocarbon prices and Western sanctions imposed after Moscow’s illegal annexation of Crimea in early 2014.

On September 12, 2014, the United States and the European Union imposed additional sanctions on Russia based on its continued aggression against Ukraine; these forbade EU and U.S. companies from helping Russia extract oil from Arctic, shale or offshore fields. The expanded U.S. sanctions were explicit: “Treasury has also imposed sanctions that prohibit the exportation of goods, services (not including financial services), or technology in support of exploration or production for Russian deepwater, Arctic offshore, or shale projects that have the potential to produce oil, to five Russian energy companies—Gazprom, Gazprom Neft, Lukoil, Surgutneftegas, and Rosneft—involved in these types of projects” (Treasury.gov, September 12, 2014).

While onshore Yamal LNG operations were unaffected by the new Western sanctions, they had an immediate effect on a massive joint Exxon-Rosneft joint drilling venture, the $700 million Universitetskaia-1 offshore well in the Kara Sea. The project’s operations were suspended (The Barents Observer, September 30, 2014).

Given the importance of hydrocarbon exports to the Russian economy, however, the government continued development of new oil and gas fields in spite of Western displeasure; Arctic reserves, in particular, have become a high priority. And clearly, foreign sanctions have, at best, only slowed Russia’s offshore development. Beyond the commissioning of the Kristof de Marzheri, Minister of Natural Resources Sergei Donskoi announced, on March 27, 2017, that the state oil company Rosneft will, this year, quadruple its spending on offshore shelf exploration to 43 billion rubles ($754 million), four times more than in 2016. Gazprom will also intensify its offshore exploration, increasing its spending in 2017 to 37.8 billion rubles ($663 million). Rosneft now has 53 offshore licenses and Gazprom has 41, the majority of which are in Arctic waters (TASS, March 28).

DSME has a further 14 Arctic-hardened LNG carriers on order, all contracted to serve the Yamal project. In the wake of the Kristof de Marzheri proving its feasibility along the Northern Sea Route (NSR), Sovcomflot announced plans to obtain a fleet of 15 tankers in all for transmitting Novatek’s LNG exports (Sovcomflot.ru, accessed March 28).

Related: Huge 300,000 Bpd Fracklog Could Derail Oil Price Recovery

In conjunction with the development of the NSR, the Russian military is increasing its Arctic presence (see EDM, December 3, 2014; September 21, 2015; November 6, 2015; April 13, 2016; November 1, 2016), in turn eliciting increased interest from other polar countries, particularly North Atlantic Treaty Organization (NATO) members the United States, Canada, Norway, Iceland and Denmark. According to the U.S. Navy Arctic Roadmap 2014–2030, conflicts are possible in the region. And the document outlines tasks to maintain U.S. dominance in the Arctic (Navy.mil, February 2014). For the U.S., as the Arctic’s waters open, the 51-mile wide Bering Strait, where Russian and U.S. territorial waters intersect, will have increased strategic importance as a maritime chokepoint for surface and submarine vessels entering and departing the polar region. For Russia, meanwhile, the Bering Strait has special strategic significance because it allows it to connect its Asian and European naval forces via internal waters. And from an economic standpoint, as the NSR’s Pacific entryway, the Bering Strait has the potential to become increasingly important for seaborne commercial trade between Europe and Asia.

Given the importance of energy exports to the Russian economy, its government is committed to massive long-term investment in the sector, as the expansion of Sovcomflot’s maritime fleet with cutting-edge LNG tankers proves. Beyond military confrontation, the possibility for economic cooperation with other Arctic nations exists in the form of the eight-nation Arctic Council. On February 7–8 the Arctic Economic Council, established in 2014 under the auspices of the Arctic Council, held its first meeting in St. Petersburg, hosted by Sovcomflot (Sovcomflot.ru, March 2017). It remains to be seen to whether commerce will trump conflict in the Great White North.

By Jamestown.org

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News