Novatek, Russia’s largest private natural gas company, took another step toward optimizing its transport logistics along the Northern Sea Route, signing a deal with South Korea’s Daewoo Shipbuilding and Marine Engineering for the construction of two massive LNG storage barges totaling $748 million.
Delivery is expected in 2022. Novatek had first announced plans for a transshipment hub in 2017.
The floating LNG storage units will serve as permanent transshipment facilities located near Murmansk and off the Kamchatka peninsula at the western and eastern termini of the NSR.
LNG barges are floating LNG terminals which receive and store natural gas before transferring it onwards to another vessel. The units will be the world’s largest floating LNG storage holding 360,000 cubic meters of LNG, several times larger than existing units. Each barge will cost just over $374 million and the contract contains an option for two additional barges.
Final step in logistics puzzle
The barges will allow Novatek to significantly reduce its transport costs. The two new barges thus represent a crucial final step in optimizing Novatek’s export logistics from the Arctic to Europe.
The floating LNG storage units will be used as transshipment hubs at both ends of the NSR. Novatek and its shipping partners use highly specialized ice-capable Arc7 vessels to transport LNG from the point of production on the Yamal peninsula in the Russian Arctic to Europe or Asia. Ideally, the company will restrict the use of Arc7 vessels to the icy parts of the voyage before transferring the LNG to conventional LNG carriers which are cheaper to build and run more efficiently.
Currently, the Arc7 ships either travel the full distance or alternatively Novatek uses ad-hoc and temporary ship-to-ship transfer of LNG. For that purpose the company has partnered with Norwegian shipping company Tschudi in 2018, 2019, and 2020 to transfer up to 15 million tons of LNG near Honningsvåg off Norway’s northern coast. The company and Norway faced substantial criticism from the United States for cooperating with Russia.
Continued partnership with DSME
DSME is one of the world’s largest shipbuilders and has previously cooperated with Novatek on the design and construction of the first batch of 15 Arc7 icebreaking LNG carriers. The first vessel of this type, Christophe de Margerie, which was delivered in 2017, just completed a record-early transit along the NSR delivering LNG to China in May, two months earlier than previous voyages.
The LNG barges are large enough to receive cargo from two Arc7 LNG carriers, which each hold 172,000 cubic meters of LNG. Yamal LNG produces around 16 million tons of LNG per year. With the construction of Arctic LNG 2, another LNG project in Russia’s Arctic, production will more than double to 38 million tons, likely necessitating additional barges to provide enough storage capacity at the transshipment location. Novatek retains options for two additional barges as part of the contract.
Specific details of the deal with Novatek remain confidential, explained a source at DSME to High North News. The company, however, revealed to HNN that the units will be 400 meters long, by 60 meters wide and 30 meters tall. No images have yet been released of the barges.