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With Europe out of the picture due to sanctions, Russia has begun rerouting oil previously destined for the continent to China and Asia via the Arctic Ocean’s North Sea Route (NSR). Russia sent two initial crude oil shipments to China in mid-July, with four more oil tankers currently headed the same way via the Arctic, each carrying around 750,000 barrels of crude oil.
The Arctic shortcut is around 30% faster than the traditional route through the Suez Canal, and experts are saying the NSR will be key to diverting the flow of crude oil away from Europe and toward Asia. Until recently, Russia had used the NSR to send oil shipments to Asia only sparingly over the past decade
But the pivot to the East in terms of oil and liquefied natural gas (LNG) flows was always planned by the Russian government, Matt Sagers, specialist in Russian energy at S&P Global, has told High North News.
“This process is now being pushed harder with the loss of the European market for Russian oil and the re-orientation of oil exports to “East of Suez”. Use of the Northern [Sea] Route reduced the number of days at sea and therefore the number of tankers (and overall capacity) that is required to move oil eastward. Entire upstream developments, like Vostok Oil, are intended to be evacuated via the route,” Sagers has explained
And, transit volumes via the NSR are likely to expand even more rapidly.
“According to our records, Russian state-owned tanker company - Sovcomflot (SCF) alone owned over 35 ice class tankers above 70,000 dwt. There is more tonnage in operation, with varied ownership,” Svetlana Lobaciova, Senior Market Analyst at E.A. Gibson, has told High North News.
But environmentalists are warning that expanding NSR flows pose a serious threat to the delicate Arctic ecosystem. According to Mawuli Afenyo, Professor of Maritime Business Administration at Texas A & M University, increased traffic increases the probability of an accident occurring in this region, with very dire consequences. According to Afenyo, oil encapsulated in ice can quickly travel large distances before the ice melts and the oil gets released into the seas.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.