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Yamal LNG cargo completes ice-covered transit of Northern Sea Route: Novatek

Highlights

Christophe de Margerie headed east to China

Early start to NSR shipping from Yamal LNG

Channel usually become navigable in late June

London — A cargo of LNG from the Novatek-operated Yamal LNG plant in northern Russia has completed its journey across the ice-covered part of the Northern Sea Route (NSR), the Russian company said June 1.

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The cargo -- being carried by the specialized icebreaker vessel, the Christophe de Margerie -- is the first this year and represents the earliest seasonal use of the route to date.

According to S&P Global Platts trade flow software cFlow, the Christophe de Margerie left the port of Sabetta on May 18 carrying a cargo of Yamal LNG and is expected to arrive at the Chinese port of Yangkou on June 10.

In a statement, Novatek said the voyage took place before the traditional start of the summer navigation season in average ice conditions, with the maximum ice thickness on the route reaching 1.3 meters.

"Eastbound transportation of LNG along the NSR is not normally performed in May as this represents one of the most difficult months for navigation," it said.

The Christophe de Margerie passed the Ob Bay and a part of the Kara Sea without ice-breaker assistance and then met with Atomflot's nuclear icebreaker Yamal, which escorted the tanker with ice navigation on the eastern part of the NSR.

Novatek CEO Leonid Mikhelson said the company was "actively working" to expand the eastbound navigation season for the NSR.

"We are looking forward to further development of state support for this trade route by increasing icebreaking capabilities as well as full-scale navigation and hydrographic assistance for shipping," Mikhelson said.

"This support allows us to significantly contribute to the annual cargo turnover along the NSR by implementing our large-scale LNG projects to produce up to 70 million mt/year by 2030," he said.

Improved economics

The first LNG tanker carrying a Yamal cargo to use the NSR in the 2019 window, the Vladimir Rusanov, left Sabetta on June 29.

Being able to send cargoes eastward to Asia so early could mean more Yamal LNG cargoes moving directly to Asian markets rather than being sent to or transshipped in Europe.

"For Novatek, the opening of the NSR not only helps contribute to key strategic aims of the Russian government, but also substantially improves the economics of sending LNG to northeast Asia, the global LNG market's growth engine," S&P Global Platts Analytics said in a recent note.

"Yamal exports to northeast Asia via the NSR are around $0.70/MMBtu cheaper and 17-20 days faster than traversing the southern sea route via Europe," it said.

"It is no surprise Novatek is aiming to master year-round navigation through the NSR, an objective which the Christophe de Margerie's brings one step closer to realization."

The NSR is normally open until around mid-November, meaning that there are limits on how many cargoes can reach Asia via the route.

Around 15 Arc7 ice-class specialist tankers are in operation shuttling back and forth from the Yamal LNG plant.

Above capacity

Novatek launched the 16.5 million mt/year (22.8 Bcm/year) capacity Yamal LNG plant in December 2017 and in 2019 shipped 24.7 Bcm of gas equivalent, more than its nameplate capacity, according to data from Platts Analytics.

In an interview with Platts last month, Novatek CFO Mark Gyetvay said the Yamal LNG plant continued to operate at above its nameplate capacity, and in the first quarter ran at an annualized rate of roughly 122%.

The Christophe de Margerie -- named after the former CEO of French major Total who died in a plane crash in October 2014 -- made the first solo icebreaking journey eastward via the NSR in July 2017, carrying an LNG cargo from Norway's Hammerfest LNG plant to the South Korean port of Boryeong.

The 18-day crossing marked the icebreaker's first commercial voyage.

The first cargo from Yamal LNG to be shipped via the NSR was the Vladimir Rusanov on June 25, 2018.