Novatek creates shipping company to export Arctic gas under Russian flag

Share
Russia’s Novatek is setting up its own shipping firm to adapt to legislation nationalizing shipping of oil and gas along the Northern Sea Route. This picture, taken in 2016, shows the Russian icebreaker Tor leading a cargo ship at the port of Sabetta, in the Russian Arctic. (Kirill Kudryavtsev/AFP/Getty Images)
Russia’s next major liquified natural gas project is likely to be served by a fleet of domestically built vessels sailing under Russian flag.

Natural gas company Novatek has decided to establish the Sea Arctic Transport, a subsidiary managing shipping operations in Arctic waters.

According to CEO Leonid Mikhelson, the new unit will help enhance efficiency related to costs and fleet management, the company informs.

“The long-term strategy of Novatek includes the growth in LNG production in the Arctic region to at least 55 million tons per year [and] therefore the organization of efficient models for shipping on the Northern Sea Route is one of our priorities.”

It will help boost competitiveness, Mikhelson argues.

“The establishment of our own transport company fully corresponds with our goals and allows us to […] enhance competitiveness of Novatek’s Arctic projects.”

Shipping restrictions on Northern Sea Route

The decision to create a new company comes as Russian authorities are taking measures to nationalize shipping along the Northern Sea Route.

In mid-November 2017, President Putin announced that all shipments of oil and natural gas along the Northern Sea Route would be nationalised, and a bill from the State Duma followed few weeks later.

Then, in March 2018, the Ministry of Industry and Trade elaborated a bill, which says that only Russian-built vessels will be allowed to ship to and from ports on the Northern Sea Route.

Ultimately, the new legislation will allow only Russian-built vessels shipping under Russian flag to carry oil, natural gas and coal on the Northern Sea Route.

At the same time, Russian Arctic shipping is experiencing a hike with more than ten million tons of goods sent on the Northern Sea Route in 2017. And more is to come. Among the priorities laid down in Vladimir Putin’s strategy for the next six years is an increase in Northern Sea Route shipping to 80 million tons.

Legislation a headache for LNG carriers

The new regime is a potential headache for the foreign shipping companies which already are engaged in the region.

Foreign companies like Teekay, Dynagas and Mitsui are all instrumental in building LNG carriers for Novatek’s Yamal LNG project. The powerful new ships are all built in Korea and carry foreign flags. Only one of the 15 Yamal LNG tankers, the “Christophe de Margerie”, is owned and operated by a Russian company. However, neither this ship which is run by Sovcomflot carries a Russian flag.

Novatek’s new shipping company is likely to be established in connection with the development of the Arctic LNG-2, the projected new natural gas project in the region. The Arctic LNG-2 is planned to produce up to 20 million tons of LNG per year and will require an additional big number of tankers.

By developing its own fleet, Novatek is moving in the same direction as mining and metallurgy company Norilsk Nickel. In the 2000s, Norilsk Nickel built up its own fleet of ships, thus allowing for independence from other shipping providers. Norilsk Nickel today has a fleet of five ice-class Arc7 container vessels which shuttle between Dudinka and Murmansk.

Related stories from around the North:

Canada: Inuit perspectives crucial as Canada develops Northwest Passage says report, Eye on the Arctic

China: Qingdao plays pivotal role in China’s Arctic strategy, Cryopolitics Blog

Finland: Baltic Sea helps Helsinki post record cruise season, YLE News

Norway: Seeking a greener image, Norway’s Statoil rebrands itself as Equinor, The Independent Barents Observer

Russia: Arctic seaports bustle as shipping on Russia’s Northern Sea Route reaches new high, The Independent Barents Observer

Sweden: Modi’s Sweden trip highlights India’s interest in North, Radio Sweden

United States: Alaskan airport 5th in world for air cargo, Alaska Public Radio Network

Share
Atle Staalesen, The Independent Barents Observer

Atle Staalesen, The Independent Barents Observer

For more news from the Barents region visit The Independent Barents Observer.

Do you want to report an error or a typo? Click here!

Leave a Reply

Note: By submitting your comments, you acknowledge that Radio Canada International has the right to reproduce, broadcast and publicize those comments or any part thereof in any manner whatsoever. Radio Canada International does not endorse any of the views posted. Your comments will be pre-moderated and published if they meet netiquette guidelines.
Netiquette »

Your email address will not be published. Required fields are marked *