Oil from the Sakhalin-1 project is increasingly going to China

Given the problems with the supply of Sakhalin-1 oil to India, oil from the project is increasingly going to China. This year, five tanker shipments of Sokol oil have already been delivered to the country. But more than a dozen tankers loaded with oil of this grade are still idle in the absence of consensus on price terms with the Indian state-owned company India Oil. So far, only one tanker with Sokol has arrived in India this year – it was received by Nayara Energy, where the largest shareholder is the Sakhalin-1 operator Rosneft.

Last week, tankers Viсtor Titov and Victor Konetsky delivered shipments of Sokol grade oil from the Sakhalin-1 project to China – the ports of Shandong and Tianjin, as follows from ship tracking data.

Another Jaguar tanker, which was among more than a dozen tankers carrying this grade of oil idled awaiting shipper action, has finally unloaded at Vadinar, India. The cargo, as Kommersant expected, was intended for Nayara Energy (the largest shareholder of the refinery is Rosneft, which is also the operator of Sakhalin-1), Kpler told Kommersant, citing information from the port.

This is the first Sokol unloading in India after oil supplies from Sakhalin-1 to this country unexpectedly stopped in December 2023 due to disagreements over the terms of the contract with the state-owned Indian Oil.

As a result, more than a dozen tankers with approximately 10 million barrels of Sokol oil on board are idle at sea, awaiting unloading.

According to Reuters, China bought two February Sokol cargoes at a discount to Brent of $1 per barrel on a DES basis at Chinese ports. Prior to this, Sokol was trading in Asia at a premium to Brent. Based on current quotes, prices for Sokol at FOB De-Kastri could be at $65–68 per barrel, that is, above the price ceiling, but cheaper than the ESPO grade, says Sergei Kondratyev from the Institute of Energy and Finance.

Sakhalin-1 has been managed by Rosneft since 2022. Previously, the operator with a 30% share was the American ExxonMobil, which stopped making shipments due to Western sanctions. As a result, the Russian authorities transferred control to a Russian oil company. Other shareholders are Japanese Sodeco (30%) and Indian ONGC (20%).

Taking into account the fact that the crisis regarding Sokol supplies to India has not yet been resolved, Kommersant’s interlocutors expect an increase in oil supplies from the Sakhalin-1 project to China. According to Kpler, the tanker Victor Konetsky delivered a shipment to China in December and another in January.

In total, five shipments of Sokol went to China in January, this is the highest level of exports of this variety to China since March 2021, adds Victor Katona from Kpler.

According to him, the situation around 12 tankers that were loaded by Sokol in November-December and are still idle off the coast of Singapore and South Korea is still not resolved. “The 2023 batches still remain as dead baggage, but the 2024 shipments to China are already selling like hot cakes,” Mr. Katona believes.

In addition to Jaguar, two more tankers with Sokol have a chance to unload in India, but not to Indian Oil. Thus, the Seagull vessel, which indicated the route to Visakhapatnam, changed its destination, and is now standing in front of the Mumbai port, from where oil can be sold to BPCL. Another tanker Rani (completed side-to-side transshipment on January 27) is heading in the direction of Visakhapatnam, where the refinery of a subsidiary of ONGC, one of the participants in Sakhalin-1, is located.

Dmitry Kozlov