Novatek is planning strategic new transshipment hubs, while having its Arc7 LNGCs spend more time in the ice, as it develops a new project and drives down transport costs
The first eastbound cargoes despatched by Novatek from its Yamal LNG terminal at Sabetta in the Russian High Arctic arrived at PetroChina’s Rudong receiving facility in China’s Jiangsu province on 19 July 2018. The two shipments were also the first LNG consignments to be transported in an easterly direction along the Northern Sea Route (NSR) without the assistance of an icebreaker escort.
The ground-breaking cargoes, on board the 172,000 m3 LNG carriers Vladimir Rusanov and Eduard Toll, were made possible by the start of the summer navigation season in the Arctic and the attendant thinning of the ice cover in northern polar waters.
The vessels completed their summer eastbound journey in 19 days, with navigation in ice limited to only nine days. A westbound Yamal shipment to Asia, by means of a cargo transshipment to a conventional LNG carrier in European waters and passages through the Suez Canal and the Strait of Malacca, takes 35-40 days to complete.
Novatek estimates that the transport cost for an easterly run along the NSR, from Sabetta to Guangdong in southern China, is US$64 per tonne of LNG. In contrast, the westerly route for that shipment between the same ports, but involving cargo transshipment at Zeebrugge and Suez Canal transit fees, entails costs of US$91.50 per tonne.
Breaking the ice with LNGCs
Vladimir Rusanov and Eduard Toll are part of a fleet of 15 icebreaking LNGCs that Daewoo Shipbuilding & Marine Engineering (DSME) is building to the Arc7 ice class specifically for the US$27Bn Yamal LNG project. The vessels can proceed, unassisted, through ice up to 2.1 m thick on a continuous basis.
So far, five have been delivered and are in service. As of early August 2018, the five ships had transported 47 cargoes aggregating more than 3.5M tonnes of LNG since Yamal Train 1 commenced operations in December 2017. The inaugural cargo was delivered to a European terminal on board the first of the Arc7 series, Christophe de Margerie.
On its first eastbound Northern Sea Route voyage, Christophe de Margerie averaged 12.8 knots on the 2,360 nautical mile run from Sabetta to Cape Dezhnev
Completions of the five ships have tied in with the ramp-up in production of the first of three 5.5M tonnes per annum (mta) LNG liquefaction trains at Sabetta.
Novatek’s basic LNG delivery strategy for the Yamal project is to send cargoes westbound to Europe during the winter heavy ice cover season, which stretches from late November to June. Westbound shipments in Arc7 ships, even in winter months, do not require icebreaker escorts, whereas such escorts are stipulated for Arc7 ships travelling east from Sabetta to Asia during the November-June period.
In the summer months, when the ice cover thins, the Arc7 LNGCs are able to travel eastbound along the NSR without the need for a dedicated icebreaker escort. Asia is the principal market for LNG and the ability of these specialised ships to make direct eastbound deliveries during the summer months will be well utilised.
PetroChina, the owner of the Rudong terminal, also has a 20% stake in the Yamal project through its parent China National Petroleum Corp (CNPC), and has signed up for 3 mta offtake from the terminal over the long term. There is bound to be interest in Yamal cargoes from other Chinese buyers, especially during the summer season.
In addition, China’s Silk Road Fund controls 9.9% of Yamal LNG and Chinese shipping companies hold ownership stakes in 14 of the 15 Arc7 LNGCs.
Novatek’s ship chartering activities will not be restricted to the Arc7 icebreakers. The company is also taking on 11 additional LNG carriers, comprising a mix of conventional vessels and those of the lesser, Arc4 ice class, equivalent to the Finnish Swedish 1A designation.
These additional ships will be utilised to load cargoes at Sabetta at certain times of the year and to load transhipped cargoes from the Arc7 vessels in higher latitudes, enabling the icebreaking LNGCs to maximise their time in the icy waters for which they were designed.
"Asia is the principal market for LNG and the ability of these specialised ships to make direct eastbound deliveries during the summer months will be well utilised"
Neighbourly Arctic LNG 2
Novatek also plans to mount a second LNG export project, Arctic LNG 2, in Ob Bay, not far from Sabetta. For the loading terminal, the scheme would make use of three gravity-based platforms, each with a liquefaction plant and 213,000 m3 of LNG storage capacity, connected and sitting on the seabed.
The three-train Arctic LNG 2 facility would have a production capacity of 18.3 mta and Novatek is aiming for a Train 1 start date in 2023.
The independent Russian gas company estimates that, through the use of offsite modular construction techniques, its own proprietary liquefaction process and slightly larger trains for the Arctic LNG 2 scheme, it can save 30% in the cost per tonne of LNG produced compared to the Yamal scheme.
The fact that the Arctic LNG 2 project will require the transport of a similar volume of LNG has prompted Novatek to rethink its overall shipping operation.
The underlying drive in the reappraisal of shipping arrangements for two Ob Bay LNG export projects is to lower logistics costs. Novatek regards the key elements of the initiative to be the construction of a new generation of icebreaking LNGCs that cost less than the Yamal Arc7 ships; more efficient use of the NSR, with longer navigation periods; decreased dependency on expensive escort icebreakers; and new, strategically-located transshipment hubs.
Although new icebreaking LNGCs will be needed, Novatek is hoping that it will also be able to make some use of the 15 original Yamal ships on the new project. Such aspirations will be supported by the construction of new eastern and western transshipment hubs.
For the eastern transfer station, the plan is to moor a new LNG storage vessel with capacity to handle 20 mta at an offshore jetty in Mokhovaya harbour in Kamchatka’s Avacha Bay, about 4,000 nautical miles from Sabetta.
Novatek is carrying out front-end engineering design (FEED) work on the hub scheme and the intention is to follow that up with a green light for the project, to enable operations to commence in 2022 or 2023. For the western transshipment centre, ship-to-ship transfer operations near Murmansk have been mooted.
The east and west transshipment hubs would provide Novatek with the ability to release the Arc7 ship cargoes shortly after the vessels emerged from any ice-covered waters, thus enabling them to return to Ob Bay to load a new cargo at the earliest opportunity.
Onwards with Yamal
Meanwhile, back at Sabetta, developments have been continuing apace. Christophe de Margerie followed Vladimir Rusanov and Eduard Toll by loading the third eastbound Yamal cargo for China.
The ship set a new record for a July transit of the NSR in an easterly direction by emerging at Cape Dezhnev only seven days and 17 hours out from Sabetta, averaging 12.8 knots over the 2,360 nautical mile journey. Christophe de Margerie went on to deliver its cargo at PetroChina’s Tangshan terminal in Bohai Bay, 18.5 days after leaving Sabetta.
In early August 2018 Novatek commissioned the second of the three liquefaction trains at its Yamal LNG terminal. The start was six months ahead of schedule and the train’s inaugural cargo was carried westbound along the NSR to Europe by the 170,000 m3 LNG carrier Pskov, a Russian ice class Ice2 vessel (equivalent to an Arc4 rating) on charter to Gazprom and now sublet to Novatek.
The third 5.5 mta Yamal train is also ahead of schedule and is set to begin producing LNG “no later than early 2019”. Novatek has recently decided to build a smaller, fourth train, of 0.9 mta, at Yamal LNG’s Sabetta site. Set for a late 2019 completion, this unit will employ the company’s proprietary liquefaction technology that will be utilised for the Arctic LNG 2 project, effectively serving as a testing ground.