RUSSIA MONITOR

Date: 9 October 2019

China Gets First Oil Cargo from Russia’s Arctic

For the first time in history, Russia’s Arctic oil volumes have been delivered to the Asian market in a rare trade shipment on the Northern Sea Route. Lukoil’s trading arm, Litasco, sold the cargo of 100,000 tonnes of Varandey Blend oil to Chinaoil, the trading branch of state-owned CNPC. The delivery was made by the tanker Korolev Prospect in mid-September.

SOURCE: SOVCOMFLOT.RU

Russian shipping firm Sovcomflot, which owns the vessel, said that the tanker crossed the full length of the Northern Sea Route without using ice-breaking vessels in what was referred to as the first attempt ever. This cannot yet mark the beginning of regular supplies of Russia’s Arctic oil being shipped because –– due to harsh weather conditions –– such an opportunity opens up for no more than a few months of the year. Lukoil will be highly unlikely to again send comparable crude volumes by the end of this year. Notwithstanding that, Russia hopes to see a gradual increase in its supplies being shipped through the Northern Sea Route, which is to occur due to warmer climate and better navigability along the route. The Northern Sea Route stretches from the Novaya Zemlya in the west to the Bering Strait in the east. The development of the shipping lane was outlined by President Vladimir Putin as a leading national priority after his re-election in 2018. His so-called May Decrees included, among others, an ambition to reach 80 million tonnes of goods to be shipped through the maritime lane in the year 2024.

The head of the Northern Sea Route Administration Nikolay Monko said that by the end of the year, the volumes shipped through the Northern Sea Route are likely to reach 29 million tonnes. Shipments on the Arctic route in the first three quarters of the year amounted to 23.37 million tonnes, or an increase of more than 40 percent from last year. Last year, a total of 20.18 million tonnes of goods were transported across the route. The lion’s share of these supplies is related to the liquefied natural gas produced by Novatek. The firm’s Yamal LNG is expected to produce more than 16 million tonnes in 2019. Shipments on the NSR will amount to about 26 million tonnes in 2019, the Ministry of Transport said earlier. The Ministry of Natural Resources was way more optimistic, saying that these figures are likely to attain the level of 30 million tonnes.

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All the ministries and state agencies are confident that Putin’s 80 million tonne target will be reached by 2024. Way more ambitious figure is presented by the Ministry of the Far East and Arctic, believing volumes will reach 95 million tonnes in 2024. Russian nuclear agency Rosatom, which serves a leading role in developing the Arctic shipping route, seeks to see shipments amount to 92.6 million tonnes. But the number of ships operating on the Northern Sea Route is still low. By October 1, 2019, a total of 743 vessels had requested sailing permission on the Northern Sea Route, compared to 808 ships that applied for a license in 2018. But it is essential to remember that only some of the boats now actually carry goods. Almost half are tugs and support and service vessels, most of which are involved in oil and gas-related activities as well as take an active part in exploiting Arctic deposits while serving LNG and oil terminals.

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