By John Helmer, Moscow
The Russian government’s competition watchdog is waiting for state tanker company Sovcomflot and gas exporter Novatek to clarify exactly what plan they have decided on for liquefied natural gas (LNG) shipments from Sabetta, Russia’s newest gas export outlet on the eastern shore of Yamal and the Kara Sea. Sovcomflot said last week it has signed with Novatek an undertaking to cooperate on a feasibility study of two tankers for shipment of LNG, once Novatek launches shipments from its Yamal gasfield and refinery in three to four years’ time.
A press release from Sovcomflot said that state-owned lender Vnesheconombank (VEB) “is to look into the possibility of financing the construction of two ‘pilot’ liquefied natural gas carriers for the Yamal LNG project. Sovcomflot has confirmed its interest in operating the new vessels as a bareboat charterer and technical manager.” According to Sergei Frank, Sovcomflot’s chief executive, “we are confident that our long-standing experience of Arctic shipping…will ensure we cope successfully with the task of providing uninterrupted LNG transportation, in the challenging climatic conditions of the Yamal Peninsula.”
Following this release, a deal was announced, also last week, between the China National Petroleum Corporation (CNPC) and Novatek, suggesting that most of the 16.5 million tonnes of LNG which the new project will produce and ship will sail eastwards to China. This in turn may mean that the tanker fleet to transport the cargo will be built in Chinese shipyards and owned by the Chinese. CNPC and Novatek have signed what they call a “framework agreement on cooperation”, anticipating that CNPC will buy a 20% equity stake in the project from Novatek, joining Total of France, also with 20%. Each of the two minority shareholders will then be entitled to a corresponding share of the LNG produced for shipment. Financing for project completion is expected to be arranged by Chinese banks. CNPC’s share of the LNG shipments, which will secure the bank loans, is reported by Novatek to be “at least 3 million tonnes per annum”. But industry reports have speculated the shipment volume eastward through the Northern Sea Route may be as high as 10 million tonnes.
In February Sovcomflot’s Dmitry Rusanov, an executive with its LNG division, had announced that his company wants Novatek to agree to a consortium scheme led by Sovcomflot, because “a single operator is needed.” The full pitch for a Sovcomflot monopoly of the LNG shipments on the Northern Route can be read here.
After inviting tanker bids from Dynagas, Stena, NYK, Teekay, Prisco, and other fleet companies, in addition to Sovcomflot, Novatek refuses to say what fleet and shipping arrangements it has chosen; or if indeed it will be free to exercise such a choice by the time CNPC and its bankers buy into the project.
Dmitry Rutenberg, head of the transportation department at the Federal Antimonopoly Service (FAS), told Fairplay that according to Russian law, “it is not clear how one tender participant may exclude the other”. He and another FAS source added there has been no application from either Sovcomflot or Novatek to restrict foreign tanker companies from operating on the Northern Sea Route, once Sabetta starts loading LNG. “We need to have more complete information in order to talk about the legality of such actions,” FAS spokesman Anna Orlova said.
For Sovcomflot, London spokesman Bill Spears told Fairplay that tanker bidding is still under way and that “the final decision on operators has yet to be taken.” Acknowledging “the possible participation of several international LNG consortia, including Teekay, Stena and other LNG-operators”, Sovcomflot, according to Spears, “has never had neither the intention nor technical capacity to solely provide the LNG-transportation for the Yamal project.”
Dynagas already operates two LNG tankers certified for North Route operations. One, the Ob River, has been testing westward and eastward movements through these Arctic waters. Built in 2007 with 1A ice-classification, the Ob River has been on time charter with Gazprom since 2009 for winter operations to load LNG at Gazprom’s terminal at Aniva Bay, Sakhalin.
China has also been increasing its efforts to test operating conditions on the Northern Route and design new cargo carriers and icebreakers to suit.
Source: Robert Tustin, Lloyds Register, http://www.thedigitalship.com
“No LNG-operator in the world,” commented Spears for Sovcomflot, “is capable of completely running alone a massive project like Yamal – neither technically nor in terms of funding.”