Russia's Gazprom Neft, Sovcomflot sign agreement on cleaner shipping

Gazprom Neft and Sovcomflot have signed an agreement on improving efficiency in shipping via the Arctic Northern Sea Route, including reducing the carbon footprint of operations, and implementing new digital technology.

Development of the Northern Sea Route is a key priority for Russia, which plans to capitalize on warming temperatures to increase oil and gas production and transportation in Northern Russia. These development plans are going ahead despite concerns about the climate impact, high costs and sanctions on some oil production in the area.

The agreement covers decarbonization of shipping by using alternative fuels including LNG, hydrogen, ammonia and methanol. The companies plan to trial greener fuels on existing Sovcomflot tankers. Gazprom Neft's Dmitry Mendeleev LNG bunkering vessel will be used to refuel ships, the company said in a statement.

Currently, Sovcomflot carries out year-round shipping of more than 8 million mt, equivalent to around 160,657 b/d, of oil from Gazprom Neft's Prirazlomnoye and Novy Port projects in the Arctic.

"We are already actively using digital solutions in our work with Sovcomflot, and under the new agreement we will continue our joint technological development. Furthermore, the planned use of LNG and other environmentally friendly fuels for bunkering will make sea transport in the Arctic even cleaner," Alexander Dyukov said in the statement.

Shipping via the route is covered by Gazprom Neft's Captain digital navigation platform, which has allowed the company to reduce transport costs by 12% by choosing optimal routes, fuel efficiency, reducing ship downtime and reducing costs of icebreaker assistance, Gazprom Neft said.

"Sovcomflot prioritizes strengthening its technological leadership, which is one of the company's most important competitive advantages. At the same time, we assume that a key factor for the successful development of both global shipping and global energy is the energy transition, which is linked to a switch to fuels with a low carbon footprint," Sovcomflot CEO Igor Tonkovidov said.

The deal was signed by Gazprom Neft's CEO Alexander Dyukov and Sovcomflot's CEO Igor Tonkovidov on the sidelines of the Eastern Economic Forum in Vladivostok.