Russia May Enact Cabotage Law for Arctic Oil and Gas

On Thursday, Russian President Vladimir Putin gathered a group of top-level shipping executives at the Kremlin to encourage them to fly the Russian flag and direct their business to a Russian shipyard. Attendees included top-level leaders from Rosneft, Gazprom, Novatek and the United Shipbuilding Corporation. 

Putin has previously asked Russian shipowners to commit to ordering newbuilds at the new Zvezda shipyard in the Russian Far East. "As we have already said, for the successful operation of [Zvezda] it is necessary to ensure the effective loading of its capacities, to form a stable, long-term demand for the products. I know that the prospective plan for [orders] until 2035 has been approved," he reminded them. "And this plan, of course, must be strictly followed, not only by Rosneft, but also by other customers."

He asked for news of how the firms' orders at Zvezda are progressing and whether they are giving the yard the technical requirements for their ships in a timely manner. Putin also called on shipyards (in general) to give "distinct financial guarantees" for the quality of their product. 

Rosneft already has vessels under construction at Zvezda, but Putin emphasized that "this is not only the task of Rosneft, it is the task of the entire Russian industry." He framed it as a "common responsibility" beyond the bounds of a specific firm or sector – a "national task" aimed at creating jobs and economic development in the Russian Far East. 

In addition, Putin let the attendees know that the Russian State Duma may pass a law requiring oil and gas vessels to fly the Russian flag if they wish to trade at ports along Russia's Northern Sea Route. The bill would exclude the busy petroleum ports of Murmansk and Arkhangelsk, but it would likely include the port of Sabetta on the Kara Sea, Novatek's terminal for Yamal LNG. 

If Yamal LNG were covered, the new cabotage restrictions could affect future vessels of the Christophe de Margerie-class of icebreaking LNG carriers. Foreign shipowners Teekay, Mitsui OSK Lines and Dynagas have agreed to purchase these vessels and charter them out to Sovcomflot; however, Kommersant notes that it is unknown whether international investors would buy more of these ships for Novatek's next project if the vessels would have to be flagged in Russia.