Arctic LNG shipping manages to navigate shoals of new cabotage rules

Exceptions have been gained by non-Russian flag tankers when it comes to navigating the northern Arctic sea route – but not many, according to a report from Global Risk Insights.

An Cypriot-registered Sovcomflot that was “Russian” in all other respects would have been banned from Russian Arctic LNG Yamal ports, had it not been for recently implemented exceptions to the rules.

Russian company Novatek lobbied and won exceptions to the strict cabotage rules in Russia. Novatek vessels sail under foreign flags.

The new Northern Sea Route Directorate, an overarching authority, created to take care of the development of regional infrastructure, and manage a nuclear icebreaker fleet, is responsible for the new rules.

Novatek, Russia’s largest independent natural gas producer, had found that restrictive regulations were limiting its options. New rules had defined the Northern Sea Route as the stretch of the Russian Arctic coast between the Novaya Zemlya and the Bering Strait, but excluding Murmansk and Arkhangel. The first exception will allow the company to use its fleet of 15 LNG carriers for Yamal LNG, while the second exception will help the company develop a new strategy for its Arctic LNG-2, said the GRI report.

Novatek has ordered 15 icebreaking LNG carriers ice-class Arc7 from Daewoo Shipbuilding Marine Engineering. For Arctic LNG-2 the same number of LNG carriers will be needed.

Currently, only three LNG carriers are in operation, with the rest due for delivery by 2020. Novatek’s fleet ownership is divided between Russian Sovcomflot, Canadian Teekay, Japan’s MOL, Greek Dynagas, Cosco and LNG Shipping.