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Monday, 09 February 2015 16:54

Yamal: Centerpiece of Russia's Arctic resource development strategy

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The Yamal region contains nearly 22 per cent of the global proven gas reserves and 70 per cent of all Russian crude reserves. Nearly 85 per cent of the natural gas production in Russia comes out from the Yamal-Nenets Autonomous District.

The South Tambeiskoye field is estimated to contain proven reserves of 907 billion cubic meters of natural gas. Further, by 2020, investment potential of Yamal energy projects could be about 8 trillion rubles. Several major Russian companies are engaged in development of oil and gas fields in the Yamal area.

The Yamal peninsula juts into the Arctic Ocean and the Ob River estuary, which remains ice-bound for most of the year. Till very recently, the Yamal LNG project was a joint venture between Novatek (80 per cent) and the French Total (20 per cent) but the latter pulled out due to western sanctions against Russia following the Ukraine crisis. The Project infrastructure comprises of an LNG plant, gas and condensate processing facility, network of pipelines and storage tanks, Sabetta port, 6 icebreakers to ensure port access and a dedicated fleet of ships has been specially planned to transport the gas. The plant will have with an annual capacity to process 16.5 million tons of LNG and 1 million ton of gas condensate.

The construction of the Sabetta port began in 2012 and will be ready by 2016. It will be one of the largest ports in the Russian Arctic and involves an investment of 75 billion rouble and is being built under the Public Private Partnership (PPP) wherein the Russian government has committed two-thirds and the balance is being raised through private investments. The port will have a 50 kilometers long channel, a six-kilometer long and 420 meters wide approach channel, a four-kilometer long berthing for ships. When completed, it will be able to handle 15 million tonnes of cargo in 2018, 30.7 million tonnes in 2020 and 50 million tonnes in 2030. One of the important feature of the port is its effective ice-management system which will ensure year-round navigation and tankers will be able to load cargo at the terminal every 38 hours. The port development has been hit by sanctions and the developers have sought government’s help for funds from the National Reserves Fund and approached Chinese banks who could provide up to US $10 billion for the project

The tanker fleet comprising of ‘Arc7’ ice-class vessels capable of transporting 170,000 cubic meters will support transportation from Yamal to markets in Asia, Europe and North America. The Korean shipbuilding giant Daewoo Shipbuilding & Marine Engineering Co. is building 16 ice-class tankers valued at US $2.8 billion. These will be able to plough through ice thickness of 2.1 meters, operate in air temperature of minus 52 degrees centigrade and sail year round along the Northern Sea Routes and Arctic waters/seas without the assistance of an icebreaker. These ships also feature additional qualitative requirement for Arctic LNG tankers which allows these vessels can maintain cargo temperature of -163 degree centigrade in the tanks.

Simultaneously, Russia is building indigenous capacity for infrastructure development to support its Arctic energy strategy. In the Far East, the Zvezda yard is being rebuilt as a non-military yard. During the Cold War, the site was used for the construction and repair of nuclear submarines, which has now moved to Sevmash outside Arkhangelsk. It will have the capacity to construct LNG carriers, ice-protected ships, drilling rigs and production platforms. The facility will be ready by 2018 and it would cost the Russian government more than 100 billion roubles.

Russia has begun the year 2015 on an anxious note with western sanctions looming large on the Arctic energy projects and the profits of Gazprom, a major Russian energy giant engaged in the Arctic, plummeting by nearly 62 per cent. The Yamal project is on track clearly suggesting that the effects of the western sanctions have not deterred Russia to continue Arctic energy ambitions in the High North. Moscow is aggressively wooing Asian energy companies to invest in Yamal after western companies shut operations or chose to withdraw from the projects.

It is fair to argue that sanctions have taken toll on the Russian Arctic plans but in modern times, states have developed significant national resilience to thwart the impact of sanctions and respond in their own ways. Russia has invested in indigenous technology development and raised funds through local institutions to keep the Arctic energy projects alive. At another level, President Putin has reacted to the sanctions and decided to cut off 60 per cent supplies to Europe in the middle of winters causing immediate crisis in Bulgaria, Greece, Macedonia, Romania, Croatia and Turkey with more countries to follow.

Some western countries are exploring ways to skirt sanctions and resume business with Russia while others have decided not to impose fresh/additional sanctions. In essence, the Russian resilience to cope with political, fiscal and technological challenges is unquestionable and Moscow has taken upon itself to reengineer its Arctic resource development strategy.

Dr. Vijay Sakhuja is the Director, National Maritime Foundation, New Delhi. The views expressed are those of the author and do not reflect the official policy or position of the Indian Navy or National Maritime Foundation


Source: http://www.maritimeindia.org/CommentryView.aspx?NMFCID=7385

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