International Northern Sea Route Programme (INSROP) CentralMarine The Fridtjof Ship&Ocean Research&Design NansenInstitute, Foundation, Institute,Russia & Norway o Japan @ INSROP WORKING PAPER NO. 22-1995, IILO1.3 Development of Oil and Gas Exports from Northern Russia Anders Backlund Q The International Northern Sea Route Prograrnme ISBN 82-7613-119-0 ISSN 0805-2522 DISCLAIMER Portions of this document may be illegible in electronic image products. Images are produced from the best available original document. International Northern Sea Route Programme (INSROP) CentralMarine The Fridtjof ship & ocean Research&Design NansenInstitute, Foundation, Institute,Russia & Norway @ Japan @ INSROP WORKING PAPER NO. 22-1995 Sub-programme III: Trade and Commercial Shipping Aspects. Project 111.01.3: Development of Oil and Gas Exports fkom Northern Russia. By Anders Backlund, M.SC. Address: Kvzemer Masa-Yards Technology Inc. Kaanaantie 3 A FIN-OO1OOHelsinki FINLAND Date: 14 Novemeber 1995. Reviewed by: Nathan Mulherin, Research Physical Scientist, US Army Cold Regions Research and Engineering Laboratory, USA. What is an INSROP Working Paper and how to handle it: ,,.,.,: ....... ,.:..: ..:.:.:::.,:x ..:..- >..,.,; ; , .,..L .............. ........ ... ... , .,......,.,.-.-.-..-,.,---,:, , .....-------------,7 ... ..’ . ..:.: -.. This publication forms part of a Working Paper series from the International Northern Sea Route Programme - INSROP. This Working Paper has been evaluated by a reviewer and can be circulated for comments both within and outside the INSROP team, as well as be published in parallel by the researching institution. A Working Paper will in some cases be the final documentation of a technical part of a projectj and it can also sometimesbe published as part of a more comprehensiveINSROP Report. For any comments, please contact the authors of thk Working Paper. ?%!i!!!?%?’.y,sRol’ ... ,‘w~mG:P~ER.............. ,,.... ....,, ... INSROPis a five-yearmultidisciplinaryandmultilateralresearchprogramme,the*phase of whichcornmenwd in June 1993. The three principalcooperatingpartners are CentralMarine Research & DesignMltute (CNllMF), St. Petersburg,Russi%Shipand OceanFoundation(SOFLTo@o, Japw ad FridtjofNansen Institute (FN’I),Lysaker,Norway.TheINSROPSecretariatis sharedbetweenCNIIMFandFNIandis locatedat FNI. INSROPis splitintofourmainprojects:1) NaturalConditionsand Ice Navigation2) EnviromnentrdFactors;3) Tradeand CommercialShippingAspectsof the NSR;and4) Political,Legaland StrategicFactors.The aim of INSROPis to buiIdup a knowledgebaseadequateto providea foundationfor long-termplanninganddecision- rnakingby state agenciesas well as privatecompaniesetc., for puqoses of promotingrationaldecisionmaking concerningthe useof the NorthernSeaRoutefor transitandregionaldevelopment. INSROPis a dwectresultof the normalizadonof the internationalsituationand the Murrnansk initiativesof the formerSovietUnionin 1987,whenthe readinessof the USSRto openthe NSRfor internationalshippingwas oftlcirdlydeclared.TheMurmanskInitiativesenabledthecontinuation,expansionandintensificationof traditional collaborationbetweenthe states in the Arctic, includingsafetyand efilciencyof shipping.Russia, being the successorstateto theUSSR,supportathe Murmansk Initiatives.Theinitiativesstimulatedcontactandcooperation betweenCNIIMFandFNIin 1988andresultedina pilotstudyoftheNSRin 1991.In 1992SOFenteredINSROP as a thirdpartneron an equalbasiswithCNIIMFandFNI. Thecompleteseriesof publicationsmaybe obtainedfromthe FridtjofNansenhtstitute. NipponFoundation/Ship&Ocean . TheNorwegian M*try of . Norsk Hydro Foundation, Japan Industry and Energy . Norwegian Federation of . The government of the Russian . The Norwegian Ministry of the Shipowners Federation Environment . Fridtjof Nansen fnstitue . The Norwegian Research Council . State Industry and Regioml . Kwemer as. The Norwegian Miniitry of DevelopmentFund, Norway Foreign Affairs .P~OF~SION&ORGNM.ATIONS......................;,......}.................... .. .-,..:.:..,:.,.......... ....... .PERMANENTLY:............... : : ......ATTACHED............... ........ :,.TO... INSROP,.”:..... ...... : .3:; ~-~j’~:~ ● Ship & Ocean Foundation, Japan . MurmanskShippingCompany, . Norwegian PoIar Reswch . Central Marine Research& Russia Institute Design Institute, Russia ● Non&emSea Route . Norwegian School of Economics . Fridtjof Nansen Institute, Norway Administration,Russia and BusinessAdministmtion . Natioml fnsthute of Polar ● Arctic& Antarctic Research ● SINTEF NHL (l%mdadon for Research, Japan Institute, Russia Scientificand Industrial Research . Ship Research Institute, Japan . ARTEC, Norway - Norwegian Hydrotechnical Laboratory), Norway. ● Yuri Ivanov, CNIIMF ● Wfly Ostreng, FNI ● Masaru Sakurna, SOF KavalergardskayaStr.6 P.O. BOX 326 Senpaku Shinko Building St. Petersburg 193015, Russia N-1324 Lysaker, Norway 15-16 Toranomon l-chome Tel: 78122715633 Tel: 4767538912 Mmto-ku, Tokyo 105, Japan Fax 78122743864 Fax 4767125047 Tel: 81335022371 Telex: 121458 CNIMF SU Telex 79965 nanse n Fax 81335022033 E-maik Elii.Dmgland @fii. TeIex J 23704 wpoffice.telemax.no INSROP PROJECT IIIS.3 DEVELOPMENT OF OIL AND GAS EXPORTS FROM NORTHERN RUSSIA Anders Backlund Kv~mer Masa-Yards Technology March 1995 1. INTRODUCTION ..............................................................................................1 2. GE~~, ........................................................................................................l 3. TECHNICAL FEASIBILITY OF THE OPERATION OF LARGE LNG-CARRIERS IN THE WESTERN RUSSL%NARCTIC .............................................................3 3.1 msToRY .............................................................................................3 3.2 TECHNICAL TOPICS /l.2.3/ ...............................................................4 4. ECONOMIC FEASIBILITY OF LNG-TRANSPORTATION FROM THE KHARASEVEY AREA TO ROTTERDAM ..........................................................6 4.0 GENERAL /4/ .......................................................................................6 4.1 VESSELS .............................................................................................6 4.2 ENVIRONMENTAL CONDITIONS /5,6,7,8,9,15,16/ .........................7 4.3 TRANSIT TIME CfiC~ATIONS .....................................................8 4.4 COSTS OF SEA TNSPORTATION ................................................9 4.5 COSTS OF LAND-BASED FACILITIES .............................................10 4.6 POSSIBLE RISKS AND THEIR EFFECT ON FEASIBILITY .............12 5, COMPARISON WITH PRESENT TRANSPORTATION/ COMPETITORS ....13 6. A COMPARISON OF ASSISTED AND INDEPENDENT OPERATION .........15 6.1 DESCRIPTION OF DIFFERENT OPERATING MODES ....................15 6.2 DIFFERENT RATE S~UCmS ....................................................l7 ~ 7. SOME VIEWS ON THE EXPORT OF OIL FROM NORTHWEST RUSSIA ...19 8. CONCLUSIONS AND RECOMMENDATIONS .......-....................--.................2o REFERENCES ......................................................................................................22 1. INTRODUCTION As part of INSROP Subprogram III, Trade and commerckd shipping a study has been prepared concerning the exportation of oil and gas from Northern Russia. The main purpose of this study is to compare the transportation costs from Northern Russia to market with costs from competing areas. This study concentrates on LNG- transportatio~ but some comments are also given on oil transportation. The study tries to include most cost factors that can difFer compared to present transportation the greatest emphasis being placed on the actual sea transportation cxxts. A separate discussion on the differences caused by operating mode (assisted vs. independent) is also included to give a view of the effkct of operating mode on total costs. The results are supposed to give a starting point for more detailed comparisons about the effects of dflerent solutions on total costs. 2. GENERAL When discussing the use of the Northern Sea Route for international trafEc, one important aspect is the export and import of goods to the Northern areas of Russia. The imports are mostly based on goods for the communities and some raw material for the local industry. Present exports are concentrated on the combinates in the Yenisey-regionj but the greatest potential for fiture exports lie in the oil and gas fields along the Northern coast of Russia. In addition to this, export terminals along the northern coast can be used for the export of oil products from larger areas in Russi~ as the number of safe export routes from Russia is decreasing. The economic feasibility study is made on LNG-transportation from the Kharasevey area on the Yarnal peninsula to Rotterdam. This westbound route is selected because of its more natural suitability compared to various competitors. Rotterdam is selected to be the market, because of its central location. On the basis of this calculation other markets can be compared with little extka work. One of the main topics when comparing different solutions for Arctic transportation is to evaluate vessels of dfierent ice breaking capability, the range being from vessels needing assistance by icebreakers in all ice conditions to vessels capable of year-round 1 independent operation. Such a comparison is very complex in nature, as it includes the evaluation of pricing politics regarding the use of icebreaker assistance. 2 3. TECHNICAL FEASIBILITY OF THE OPERATION OF LARGE LNG-CARRIERS IN THE WESTERN RUSSIAN