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The freezing silk route

Wednesday, July 25th, 2018 at , Opinion

Yamal is exactly at the opposite end of Eurasian land mass to the Middle East, where the gas king Qatar is located


You may dislike being in an area, where freezing temperature lingers for most of the year. But if you want to make your natural gas liquid (as in LNG), the below-zero weather is your friend. 

Thing is, you have to cool the gas to turn it into liquid. So you save a lot of money, extracting your gas and basing your factory in a place like Yamal, extreme north of Russia, on the shores of Arctic Ocean.

Last week, the Vladimir Rusanov, a 172,000-cu-m LNG carrier, brought the maiden shipment of Yamal gas to Jiangsu province in China. It’s an historic event. Russia has always excelled in pipeline mode of gas transportation, lagging behind the LNG crowd.

Now it is joining that crowd, already producing as much LNG as Indonesia does. But the start of Asian shipments can make Russia a No 4 global exporter, after the US, Qatar and Australia.

The Yamal gas fields are huge, but how about its location in the middle of cold wastelands, with no big cities around? Strange it may seem, it’s the location that makes Yamal advantageous.

At the looks of it, Yamal is exactly at the opposite end of Eurasian land mass to the Middle East, where the gas king Qatar is located.

But the carrier’s journey to China from the Middle East takes 35 days. While it’s only 19 days from Yamal.

And that’s not small money, it’s “hundreds of thousand dollars per ship”, according to the industry’s estimates.

Admittedly, the Qatar gas is still cheaper. But the American is not.

China aims at using more gas in its energy balance, attaining its 10% share by 2020. The consumption is expected to keep rising, said the People’s Daily, with imports reaching 171 billion cu m in 2023.

Fifty billion cum will come from Russia in 2018, while 2019 may see 60 billion cu m reaching China.

What we see here is a big political project of several nations. It has just started — the Yamal LNG corporation made its first shipment (not to China) last March.

But the Russian Novatec OAO company only owns 51.1% of the stock, with 20% belonging to France’s Total SA, and the rest is Chinese — China National Petroleum Corp and the Silk Route Fund.

Simply speaking, there would have been no Yamal venture without the Chinese money and, more important, the Chinese contracts.

So, the Russian Minister of Energy Alexander Novak, arriving to Jiansu to greet the first tanker, complimented his host by saying that an Ice Silk Route had opened.

China, essentially, is currently shaping all of Russia’s energy sector, the mainstay of its economy.

There are several other big projects, like the Siberian Power gas pipeline, which are also mainly China-inspired.

There is another similar joint project, also with Novatec, called Arctic LNG-2, which by 2023-2025 may produce 19.89 million tonnes of gas.

So, we are not talking about trial shipments. We are talking about an entirely new gas supplier, mainly for Asia.

One more Asian nation figures prominently in the equation, and that’s South Korea. Russia, for obvious reasons, has been making icebreakers as early as in late 19th century.

It is famous for constructing, in 1957, the first-ever nuclear-powered icebreaker, named, naturally, after Vladimir Lenin, the founder of the Communist state.

The 16,000 tonne monster, after being decommissioned in 1989, is still around, as a museum at the port of Murmansk.

But Russia has never been building LNG carriers. To think of it, only some years ago the gas moguls were sneering at the very idea of producing such commodity as LNG, saying that “Russia is about pipelines”.

And don’t forget that in our case it has to be a special kind of LNG carrier, with some ice-breaking capabilities.

So, by now, there are five ships that are already plying the Ice Silk Route, all of them Korean-made. Ten more are under construction.

They are capable of breaking solid ice layer of 2m, which in most cases is enough.

Good old Lenin was able to crush every imaginable kind of ice, but then there are supposed to be its heirs, ready at a call, as a part of new infrastructure at the whole route.

Naturally, there is a talk of a need for Russia itself to build that kind of ships. There is a ship-building enterprise in the Russian Far East, called Zvesda (The Star).

That’s where the LNG ice breakers are supposed to be made one day. The know-how there is, most naturally, Korean.

Arctic strip of land beyond the Polar Circle is regularly getting fashionable in Russia, the first craze registered soon after 1900, and then in romantic 1930s, and then in the even more romantic 1960s. What we see now is a solid economic foundation for a human desire to prove oneself to be stronger than extreme colds.


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