LNG

Japanese liquefied natural gas imports were still in sharp decline with more competition coming from thermal coal and nuclear and as storage levels increased under government energy security policies ahead of the Northern Hemisphere winter season.

Russian Prime Minister Mikhail Mishustin said the government was taking additional measure to increase liquefied natural gas cargo deliveries to the Asia-Pacific by the Northern Sea Route to offset the loss of pipeline gas customers in the European Union.

Japanese liquefied natural gas imports for the first six months of the current fiscal year rose by 4 percent and with deliveries from the Russian Far East Sakhalin liquefaction plant increasing year-on-year and costing 90 percent more than the previous year as more Atlantic Basin shipments pointed at Europe.

Shell, the global oil and gas major, said it was ready to consider future participation in a new liquefied natural gas project in Russia as the company sees growth potential in supplying more natural gas to satisfy increasing demand in Asia.

Sept 3 (LNGJ) - Mitsui OSK Lines (MOL) of Japan has signed an accord with the Russian state leasing company (GTLK) for the possible acquisition of a 49 percent stake in two LNG floating storage units (FSUs) currently being built and with 100 percent ownership held by GTLK. The FSUs will have the world’s largest storage capacity of about 360,000 cubic metres and will be deployed by Russian natural gas company Novatek at Kamchatka and Murmansk for LNG cargo trans-shipments from the existing Yamal plant and Arctic II facility now under construction.

   The two FSUs are being built by Daewoo Shipbuilding and Marine Engineering of South Korea. “By transporting LNG via the Northern Sea Route and by trans-shipping at Kamchatka and Murmansk, it is expected to reduce voyage costs and greenhouse gas emissions. In addition, securing LNG at a location close to a point of consumption is believed to increase security and reliability of energy supply,” explained MOL.

Novatek, the operator of the Russian Yamal LNG plant and developer of the Arctic LNG II project, has signed a strategic agreement with the Japan Bank for International Cooperation (JBIC) on financing projects such as carbon-capture around its liquefaction and plants in northern Siberia.

Wärtsilä, the Finland-based equipment provider for maritime and energy markets, said it would supply the Inert Gas Generator systems, as well as navigation system technology for six newbuild LNG carriers under construction to serve the Arctic LNG II export project in northern Siberia.

The orders were placed with Wärtsilä by the South Korean shipyard, Daewoo Shipbuilding Marine Engineering (DSME).

There are options for an additional two or possibly four vessels.

One division of the Finnish company, Wärtsilä Gas Solutions, will deliver the Inert Gas Systems used for safe operations on LNG and other gas vessels as well as oil tankers.

Another part of the DSME contract is with the Wärtsilä Voyage division to provide display system and workstations for the Wärtsilä Navi-Sailor Electronic Chart Display and Information System (ECDIS), Navi-Radar, the Navi-Conning navigation information display system, a Bridge Alert Management System (BAMS) and the Wärtsilä Navi-Planner for advanced route planning.

The scope also includes IRIDIUM satellite communication systems.

“These vessels will operate in severe climatic conditions, and it is essential that all onboard systems are capable of safe and reliable performance under all conditions,” said Jaechul Ha, an executive at Wärtsilä Gas Solutions.

“We have worked closely with both DSME and Sovcomflot (SCF) in the past, and are pleased to continue these relationships,” added Ha.

The company said that all the navigational systems to be installed on the Russian-flagged carriers come integration-ready with Wärtsilä Voyage’s flagship Fleet Operations Solution.

The 172,500 cubic metres capacity vessels will have a high ice-class rating for year-round operations along the challenging Northern Sea Route, delivering cargoes eastwards to Asia from the liquefaction plant in northern Siberia.

Wärtsilä said the delivery of its equipment to the South Korean yard was scheduled to begin in September 2021.

The company’s Wärtsilä Marine Power division had earlier in 2021 announced an order for 46 dual-fuel engines for the same six LNG carriers being built for Arctic LNG.

Sovcomflot, the Russian shipping line with an overall fleet of 145 vessels, said its LNG carrier, the “Christophe De Margerie”, reached Cape Dezhnev in Russia’s Far East to complete the earliest annual eastbound voyage carrying a cargo along the Northern Sea Route.

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.

Russian billionaire energy investor Albert Avdolyan has reportedly hired the Franco-US engineering company TechnipFMC to design and construct an LNG export plant in the Far East of the Russian republic of Yakutia.

A spokesperson for Avdolyan told reporters that the LNG project would cost around $10 billion and would export cargoes to Asia by 2025.

The LNG plant will aim to produce 13 million tonnes per annum.

Yakutia is a huge land mass and it is bigger than the combined territory of seven of the largest European Union nations, including Germany and France.

It occupies one-fifth of the territory of Russia and 40 percent of the north of Yakutia is inside the Arctic Circle.

Avdolyan’s company will have to seek permission from the Russian government to export LNG.

However, a new Russian law has been passed allowing a broader range of companies to take part in the oil and gas industry if they are investing in northern, remote regions and they can also qualify for tax breaks.

The legislation was passed by the State Duma in April 2020 and specifically allows the expansion of the list of companies entitled to export natural gas and LNG from Russia.

Russia has prioritised the development of LNG for export and the plant if it is built would be the country’s fourth.

Gazprom controls the Sakhalin LNG plant in the Russian Far East and another Russian natural gas company Novatek operates the Yamal LNG joint venture in northern Siberia, with French major Total and several Chinese companies holding stakes.

A third plant called Arctic LNG II is already in the engineering phase and will be built on the Gydan Peninsula, also on the northern Coast of Siberia. Investors in Arctic LNG II include Novatek, Total and a host of Chinese and Japanese energy companies.

The Avdolyan spokesperson said that TechnipFMC, which was involved in the construction of Novatek’s Yamal project, will work on the design of the Yakutia plant to be completed by the end of 2020.

TechnipFMC is one of the leading LNG engineering, procurement and construction companies with worldwide experience.

The company is planning to split into two separate entities with the LNG engineering spin-off being called Technip Energies. However, the process has been delayed for now.

Avdolyan has already agreed to buy a stake in another energy project in Yakutia.

In March 2020 his company announced its purchase of a 49 percent stake in the Elga coal project from the Russian lender Gazprombank.

Elga is one of the world’s biggest coking coal deposits and Avdolyan is said to have paid Gazprombank 45 billion rubles ($610 million) for the stake in the project, which will still need big invesments.