Russia and China Sign Arctic Deal

Novatek, Sovcomflot, COSCO Shipping and the Silk Road Fund Co., have signed a four-party agreement to establish a joint venture Maritime Arctic Transport LLC.

The focus of the Maritime Arctic Transport joint venture is to manage an ice-breaking tanker fleet of Arctic ice-class vessels, comprising existing and new vessels that will transport LNG for current and planned Novatek projects, namely: Yamal LNG; Arctic LNG 2 and others.

The agreement was signed by Sergey Frank, President and CEO of Sovcomflot; Leonid Mikhelson, Chairman of the Management Board of Novatek; Xui Lizhong, Chairman of the Board of Directors of COSCO Shipping Corporation; and Wang Yanzhi, President of the Silk Road Fund.

Frank said: "The sheer scale and level of technical complexity of the new international project to provide safe, year-round, transportation for LNG across the Northern Sea Route has required the combination of a whole range of intellectual, technological, human and financial resources, from leading Russian and Chinese organizations and businesses.”

He added: “The project's transport and logistics are consolidated around a single operational platform that will contribute to increased efficiency, safety, and further optimization of the entire cargo transit traffic system through the waters of the Northern Sea Route, including the Polar Silk Road project."

In 2018, releasing its first official Arctic policy white paper, China said it would encourage companies to build infrastructure and conduct commercial voyages as part of its Polar Silk Road plans in the Arctic. China holds a major stake in Russia’s Yamal LNG project.

Sovcomflot (SCF Group)'s fleet includes 146 vessels with a total deadweight of over 12.8 million tonnes. More than 80 vessels have an ice class. Sovcomflot is involved in servicing large oil and gas projects in Russia and around the world: Sakhalin-1; Sakhalin-2; Varandey; Prirazlomnoye; Novy Port; Yamal LNG, and Tangguh (Indonesia). For the projects it serves in the Arctic and subarctic sea basins, the company's vessels had transported more than 250 million tonnes of crude oil and some 50 million cubic meters of LNG.

The start of the successful cooperation between Sovcomflot and Novatek began in 2010, following the organization of experimental high-latitude voyages along the Northern Sea Route which helped ground the technical possibility and economic feasibility of energy shipping with large-tonnage vessels along the Northern Sea Route. Sovcomflot was directly involved in developing the transport component of the successfully implemented Yamal LNG project and, today, operates the world's first Arctic LNG carrier Christophe de Margerie.

Arctic LNG 2 Deal

On June 7, CNOOC Limited and subsidiary CEPR Limited agreed to acquire the 10 percent of Arctic LNG 2 LLC held by Ekropromstroy, a subsidiary of Novatek.

The Arctic LNG 2 Project is the second large onshore conventional natural gas project led by Novatek on the Gydan Peninsula in Russia, which contains the development and production of Utrenneye gas field and the construction and operation of three LNG trains.

Russian-Chinese Business Forum

The Second Russian-Chinese Energy Business Forum (the Forum) took place at the 2019 St. Petersburg International Economic Forum on June 6-7.

The Forum’s main agenda was: “Promotion of the Russian-Chinese energy cooperation along the entire production chain, in exploration and development, shipments, refining, and marketing of products.”

Speaking at a meeting with participants of the Forum, Russian President Vladimir Putin and Chinese President China Xi Jinping were positive about the results of the Russian-Chinese energy cooperation in recent years and outlined strategic goals for its further expansion. “Energy is one of the key, most dynamically developing areas of the Russian-Chinese interaction. My colleague and friend Xi Jinping and I consider the matters of energy cooperation a priority, and we support joint initiatives and projects,” Putin said.

Xi said: “The energy industry is one of the most important, productive, and broadly encompassing elements in this bilateral cooperation. Last year the amount of trade and energy resources between Russia and China exceeded $40 billion, amounting to a tangible figure of our record turnover at the level of $100 billion.”

Sovcomflot Orders More LNG-fueled Tankers

On June 7, Sovcomflot and VEB.RF signed financial agreements whereby VEB Leasing will finance the construction of three new LNG-fuelled MR tankers. Sovcomflot initially placed the order for these three tankers with the Zvezda Shipyard (Primorsky region) in December 2018. The delivery of the vessels is scheduled for 2022-2023. Each tanker will have a deadweight of 51,000 tonnes, and they are intended to transport petroleum products and gas condensate, operating under 20-year time charter agreements with Novatek. The vessels will have an Ice Class 1B classification, enabling them to provide year-round transportation for hydrocarbons in challenging ice conditions, in particular within the Baltic Sea.

Sovcomflot already operates six new-generation Aframax tankers powered by LNG fuel. Five more LNG-powered vessels have been ordered by Sovcomflot from the Zvezda shipyard and will be built over the next few years. VEB Leasing previously participated in financing the construction of a number of Sovcomflot’s vessels in Russia, such as the Arctic shuttle tankers of the Mikhail Ulyanov series, as well as new-generation Aframax tankers being built at Zvezda.