Due to sanctions, oil companies are trying to use the Northern Sea Route more often to supply Urals

Under sanctions, Russian oil companies are increasingly trying to use the Northern Sea Route (NSR) to supply Urals from Baltic ports. Theoretically, such a route to Asia could be shorter and cheaper than the traditional route through the Suez Canal. According to Kommersant, Rosneft and Gazprom Neft sent three oil cargoes from Primorsk and Ust-Luga to China via this route in July and August. However, so far, the delivery time, given the difficult ice conditions, is superior to alternative routes.

Russian oil companies continue to test oil supplies from the Baltic ports along the NSR. So, in July, Gazprom Neft and Rosneft shipped two shipments of Urals grade oil (about 200 thousand tons in total) from Primorsk and Ust-Luga by Sovcomflot tankers NS Arctic and Primorsky Prospect to China, follows from Kpler data (there is at “b”). Sanctions limited the supply of Russian oil to Europe, after which India and China became its main consumers, where oil is mainly delivered through the Suez Canal, and when reloaded into VLCC tankers, around Africa. However, in summer, the route through the Arctic seas for delivery to China is shorter.

So far, however, time savings have not always been achieved: tankers sent in July, although they used icebreaking assistance, moved at low speeds due to difficult ice conditions in the Eastern Arctic, and it can take up to 50 days to deliver cargo. In August, according to Kpler, the Hammurabi tanker left Primorsk, which was loaded with about 100,000 tons of Urals from Rosneft: the oil was sold FOB to Nord Axis, with an estimated delivery time of 43 days. Last year, Trafigura transferred 10% of Vostok Oil in the Rosneft project to this trader.

In May, the issue of redirecting Russian oil supplies to the NSR was raised by the head of Rosatom, Alexei Likhachev, at a meeting with President Vladimir Putin. He then called the NSR “the safest and most attractive route.” But the key problem in redirecting significant volumes along the NSR is the lack of ice-class tankers and icebreakers, and now this route can only operate seasonally.

The advantage of the NSR lies in the ability to shorten the supply chain to China, provided that the ice conditions do not force tankers to slow down, says Victor Katona from Kpler.

The tanker Primorsky Prospect is carrying out the first delivery of Urals through the NSR in history, last year only one tanker made this way, and then with a batch of Varandey oil, he says. In September, oil exporters will continue to use the NSR. Delivery along the route Primorsk-Rizhao through the Suez Canal takes an average of 50 days, through the NSR – about 40-42 days, Mr. Katona continues.

However, the delivery of this year’s first cargo along the NSR (Primorsky Prospect) is expected to take 49 days, effectively depriving the Russian exporter of logistical advantages.

However, in August, the improvement in ice conditions in the Eastern Arctic has already significantly accelerated the passage of the NSR by oil tankers – in the current conditions, Russian suppliers can save up to 20 days on a round trip when supplying oil to China using the NSR.

According to the head of the Gekon consulting center Mikhail Grigoriev, Russian oil companies have already sent seven tankers with oil via the NSR: three tankers from Primorsk, two from Ust-Luga and two from Murmansk (in the latter case, oil was shipped from Varandey and Novy port”). Flights are carried out by Sovcomflot tankers of Ice3 and Arc4 ice classes from the Baltic ports, Arc4 and Arc5 from Murmansk, the expert adds, transportation is carried out by Aframax vessels with a deadweight of 113-117 thousand tons, but one voyage from the port of Ust-Luga is carried out by an MR tanker ( 50 thousand tons). In addition to two ships that have been waiting for a week for the improvement of ice conditions on the NSR and the approach of icebreakers, all other ships follow non-stop, he notes, the arrival of ships in China is expected from August 26 to September 16.

According to Mr. Grigoriev, the ships will transport about 700,000 tons of oil in seven voyages.

Vessels of ice class Ice3, in accordance with the rules of navigation, can stay in the waters of the NSR only until November 15, and ships of ice classes Arc4 and Arc5 also have significant restrictions on navigation conditions, especially in the eastern sector of the NSR, so it is expected that all of them will be able to repeat flights are not worth it, he concludes.

Dmitry Kozlov