Northern crude oil flow

Ports of the Russian North Sea basin can demonstrate in the foreseeable future the most dynamic growth in liquid bulk exports. This can be achieved both recovering cargo volumes through the existing facilities and implementing new projects for the extraction of hydrocarbons and building new export terminals.

Shipping oil through old facilities

According to the Energy Ministry and the Association of Sea Commercial Ports (ASOP) about 80% of Russian oil is currently being exported through the ports of Russia. Share of oil exported through the ports, is 55-60% of total production. The volume of oil and oil products through the Arctic ports of Russia does not exceed 4%.

Currently, crude oil is transshipped in the Arctic basin largely through the Murmansk-based FSO Belokamenka (owner - Rosneft) and via LUKOIL owned Fixed Offshore Ice Resistant Oil Export Terminal (FOIROT) Varandey. For the past 10 months oil exports via FSO Belokamenka slumped by 3.3 times year-on-year to 1.8 million tons.   Varandey terminal exported 2.3 million tons, a 34.6% drop from a year ealirer.

Nevertheless, things look not so bad. Actually, the export volume decline was due to the depletion of the Yuzhny Khylchuyu field, which was developed by LUKOIL jointly with ConocoPhilips (eventually, the U.S. company pulled out of the project).

However, with the commissioning of a pipeline from Kharyaga of projected capacity of 4 million tons, which was completed in early October 2012, the volume of crude exports through Varandey will be gradually restored. The export oil will be supplied through the pipeline from the Kharyaga-based North-TEK terminal to Yuzhnoye Khylchuyu with further delivery to the Yuzhnoye Khylchuyu-Varandey pipeline. The oil delivery through the pipeline will reduce the cost of the commodity transportation via the Baltic Pipeline System (BPS). The only question is the real volume of crude oil that will be delivered. The October statistics show the growth of crude exports through Varandey terminal. So, in October the FOIROT handled 421,000 tons of oil, representing a 1.5 times spike from October 2011.

Since the commodity from Varandey is shipped to Belokamenka, the Murmansk-based FSO is also receiving more volume. The level of production of Rosneft, the so-called “northern oil” directly affects the volume supplied to Belokamenka, which in recent years was permanently declining. However, the potential of the northern fields has not been exhausted and with new fields we can expect the growth of crude shipments via Belokamenka.

As for oil products, RN-Archangelsknefteproduct demonstrates strong growth. In January-October, the facility throughput soared 44% year-on-year to 1.89 million tons. Oil products are supplied not only for export but also for bunkering at the ports of Arkhangelsk, Onega and Murmansk.

Moreover, this summer Murmansk Shipping Company owned FSO Natalie of storage capacity of 143,000 tons was deployed in Murmansk. The oil product transshipped through the FSO is also supplied for bunkering vessels.

The situation in Vitino looks less encouraging. Oil traffic there shrank by 13.4% for the last ten months, to 3.12 million tons. Upon completion of gas & condensate terminal of NOVATEK in the port of Ust-Luga (Leningrad region), Vitino may loose the company’s cargo flows.

Nordic ambitions

However, the main perspectives for the northern flows are not related to the restoration of transshipment through the existing facilities, but with the construction of new ones. First of all, this is the new port of Sabetta being constructed in the framework of Yamal LNG project (the project investors are NOVATEK and the French Total). Rosmorport has already begun dredging harbor, channels of the future port. It is assumed that the annual volume of LNG exports through the port of Sabetta (Yamal), the Northern Sea Route by in 2017 may reach 5 million tons. In the future, the volume may touch the mark of 20-25 million tons a year. Currently, LNG is shipped through the only Russian sea terminal in Sakhalin. Sabetta cargo volumes could be even higher if the port will have the spur line of the existing Ob - Bovanenkovo railway on Yamal. The issue was discussed in November 2012 at a meeting of Russian President Vladimir Putin and the head of Novatek Leonid Michelson. Michelson said that the investment issue “is less urgent than the issue of railway tariffs, which would be a single tariff and that RZD would be responsible for all transportation. This is the real question. If there is a railway line, it could be a multipurpose port."

Another northern sea LNG terminal project is Teriberka located in Murmansk region. Teriberka marine export terminal will be designed for handling LNG in the framework of Shtokman project. It is assumed that the overall performance of the two LNG processing plants to be built in the Shtokman project will amount to 7.5 million tons a year, making the company one of the largest in the world. After liquefaction, LNG will be supplied through the pipeline to a special storage and then for loading to LNG carriers. Meanwhile, the Shtokman project had been shelved but, hopefully, not for good. So, we can rely on the long term perspective. In late October, Russian President Vladimir Putin said that the construction work on the project is scheduled to begin until 2017, and that the investment decision will be made "in the near future."

Speaking of Murmansk, there is a chance that a new onshore facility for transshipment of oil cargo may appear here. Earlier, First Deputy Governor Alexei Tukavin had told about the project feasibility. "In the near future we can expect the crude oil shipments through the port of Murmansk from the Arctic fields of Rosneft , LUKOIL, Gazprom Mining Shelf... So, today, in my view, the construction of the onshore terminal for crude oil and refined products is still urgent," said Tukavin.

Overall, if all announced projects are successfully implemented the share of the Arctic basin ports iin the total volume of oil exports via sea terminals of Russia will be increased to about 15% by 2030.

Vitaly Chernov