LNG

The Norwegian Petroleum Directorate (NPD) said people are witnessing a rare event to see such high levels of natural gas and oil produced on the Norwegian Continental Shelf as was the case last year and significant investment decisions have also been made for future output including on LNG for a longer term from the Hammerfest liquefaction plant.

Equinor, the operator of the Hammerfest LNG export plant on Melkoya Island in Northern Norway, said the facility would remain shut until September 23 after a gas leak.

Emergency services were sent to the plant on September 13 after an alarm was sounded during preparations to restart the plant after maintenance.

Feed-gas for the single-Train Hammerfest liquefaction facility comes from the Snohvit gas field in the Barents Sea.

Hammerfest exported 4.72 million tonnes of LNG in 2019 compared with 5.17MT in the previous year.

Most of the volumes were delivered to European destinations like France, Spain, the Netherlands and Lithuania.

The Norwegian facility also exported small quantities last year to Asian nations such as China and India.

Hammerfest had been scheduled to restart on September 13 after a short shutdown due to an outage.

Equinor had given no previous reason for the original shutdown.

Europe’s only large-scale LNG plant has a capacity to process 18 million cubic metres of gas per day.

Most feed-gas for Hammerfest comes from a total of 20 wells in the Snohvit and Albatross fields.

This output is transported to land through a 143-kilometre pipeline

A previous scheduled maintenance saw Hammerfest reopen on June 18 after several weeks of shutdown.

Equinor has 37 percent of the Snohvit field and the LNG plant and the other partners include French major Total and Germany’s Wintershall Dea.

The Northern Sea Route (NSR) from Arctic Russia to North Asia has reopened earlier than in recent years, providing scope for LNG shipments to be re-directed from the Atlantic Basin to Pacific Basin as prices remain low, though are rising faster in Asia.

The NSR is officially defined by Russian legislation as lying east of Novaya Zemlya archipelago and specifically running along the Russian Arctic coast from the Kara Sea to the Bering Strait to enter the Northern Pacific Ocean.

The 172,600 cubic metres capacity Arctic-class LNG carrier “Christophe de Margerie” left the Yamal LNG export plant in Northern Siberia, operated by Novatek, on May 18 and is scheduled to arrive at the Chinese Tangshan import terminal on June 11 after a transit of 23 days.

The Tangshan terminal is in the northern Chinese Hebei province and is operated by PetroChina.

Shipping data shows that the “Christophe de Margerie” is accompanied by another tanker and two nuclear-powered ice-breakers, the “Yamal” and the “Vaygach”.

It is only in recent years that the NSR has started to be used earlier by LNG carriers pushing ahead to deliver cargoes to North Asia.

The 172,600 cubic metres capacity LNG carrier “Vladimir Rusanov” was the first vessel to use the NSR in 2019, having lifted a cargo at the Yamal plant in mid-June.

However, the “Vladimir Rusanov” is in Western European waters and scheduled to discharge a cargo on May 24 at the Montoir-de-Bretagne terminal in Western France.

According to analysts, the early availability of the NSR, coupled with a slowly opening Europe-Asia LNG arbitrage window - at historically low values - will result in a redirection of many Yamal cargoes away from Europe and to be pointed at North Asia.

Three other carriers are currently heading back to the Yamal plant's port at Sabetta from Europe and at least one could lift an Asia cargo.

They are the two 172,000 cubic metres capacity vessels, the “Georgiy Brusilov” and the “Vladimir Vize”, and the 172,600 cubic metres capacity carrier “Vladimir Voronin”, with arrivals scheduled before the end of May, according to shipping data.

The re-opening of the NSR comes as the Platts Japan-Korea Marker spot cargo price for North Asia cargoes for July is at $2.280 per million British thermal units and at $2.425 per MMBtu for August, higher than several weeks ago.

That’s as the European LNG price indicators, the UK National Balancing Point and the Dutch Title Transfer Facility, were lower at the equivalents on May 20 of $1.40 per MMBtu and $1.55 per MMBtu respectively.

There is currently a wider debate in Russia about accommodating much more energy shipping traffic on the NSR as usage increases.

Russian oil company Rosneft is progressing with the development of its Vostok Oil Project, a venture that is projected to deliver 25 million tons of shipments from a special seaport via the NSR by 2024.

The oil project is based on the development of several fields, including at least three in the Vankor area.

Vostok Oil will also include the development of 15 new industry towns, two airports and about 800 kilometres of new pipelines.

The traditional NSR that has been the main reference point in Russian Arctic shipping is now being debated by the government.

Growth in shipments on a wider route have been rising. Russian government data shows that in 2019, a total of 31.5 million tons of shipments were transported on the NSR, an increase of over 55 percent from 2018.

Most of the extra shipments were LNG from the Yamal plant.

Now the Russian government is referring to the Northern Sea Transport Corridor and has drawn up a report on increasing traffic volumes.

According to the Association of Sea Trade Ports, the transport corridor will be clearly referred to in the new Russian Arctic Strategy, a document that now awaits approval by the government.

The document has been written by the Russian Ministry of the Far East and Arctic and was submitted to the government on 7th of May 2020. The strategy covers the period until 2035.