Providing coverage of Alaska and northern Canada's oil and gas industry
November 2019

Vol. 24, No.47 Week of November 24, 2019

Oil patch insider: Japanese shipper, Russian gas producer team up on Arctic LNG

Petroleum News

As reported in the Nov. 15 Nikkei Asian Review, Japanese marine shipper Mitsui O.S.K. Lines, or MOL, joined up with Russian natural gas producer Novatek to ship liquefied natural gas via icebreaking LNG tankers along the Eurasian Arctic coastline to floating storage units that will assist transfer of the cargo to conventional LNG tankers.

The proposed project is expected to cost as much as US$1.47 billion with operations to start by 2023.

According to Nikkei, a joint venture will be established with the Japan Bank for International Cooperation possibly offering financing

The Japanese company will make the final decision on the investment next year, expecting to take at least a 30% stake in the project.

“Right now, the only way to transport LNG from the Arctic is by using icebreakers, which are notorious for poor fuel efficiency and high shipping costs,” Nikkei reported.

Receiving terminals will be at Kamchatka, in Russia’s far east, and in Murmansk, in the northwest, minimizing the use of the high-cost icebreakers, the article said.

To MOL a joint venture with Novatek was a “lifesaver,” Nikkei said, explaining that competition from China and others have forced it and other Japanese shippers such as Nippon Yusen and Kawasaki Kisen Kaisha to merge container shipping operations last year, cutting off a business that accounted for 40% of revenue.

LNG operations have recently become MOL’s “pillar for growth,” capitalizing on the company’s experience transporting cargo in the Arctic.

MOL’s fleet of roughly 90 LNG carriers is set to expand to 110 vessels by 2025, the article said.

But troubled relations between Washington and Moscow could pose a problem for the MOL/Novatek joint venture, Nikkei noted, saying that if current U.S. sanctions are extended to LNG-related technologies that come from American companies such as Air Products and Chemicals and General Electric it could “deal a blow to LNG production in Russia.”

Still, Novatek is hurrying to develop its own LNG processing technology, and Nikkei said the “wooing of corporate Japan could be part of this effort.”

Marushack joins in Tokyo celebration

Speaking of Japan; per story in last week’s issue of Petroleum News, in November 1969 the liquefied natural gas tanker Polar Alaska departed the onloading terminal at Phillips Petroleum’s Kenai, Alaska LNG plant and headed west toward Japan, carrying the first-ever cargo of LNG to that country.

The ship’s arrival at a receiving terminal in Tokyo Bay marked the beginning of a long and fruitful relationship between the company and its Japanese customers - a relationship that was celebrated in Japan by Bill Bullock, president, Asia Pacific & Middle East on Nov. 6.

“All of us at ConocoPhillips take great satisfaction in pioneering the export of LNG to Japan,” said Bullock. “It was our predecessors’ hard work, creativity and courage that give us the privilege of celebrating this moment.”

Unknown at the time of the writing of that article was the fact that the president of ConocoPhillips Alaska was present at the Nov. 6 ceremony (see photo in pdf and print versions of this article.).

Murkowski promotes Ted Stevens Arctic security center

In honor of what would have been U.S. Senator Ted Stevens’ ninety-sixth birthday, U.S. Senator Murkowski, R-Alaska, raised attention to an issue that was significant to him - the importance of the Arctic and a strong national defense to Alaska and the nation.

Murkowski highlighted legislation she introduced with U.S. Senator Dan Sullivan, R-Alaska, to create a new Department of Defense, or DoD, Regional Center for Security Studies for the Arctic, which would be named in Stevens’ honor.

The center, as Murkowski explained, would advance defense readiness, develop Arctic awareness, and improve allies and partner capabilities. With the growing prominence of the Arctic in global geopolitical and strategic affairs, Murkowski stressed the urgent need to give DoD the necessary tools and support to foster research and dialogues that will be critical to our nation’s national security.

The primary goals of the Ted Stevens Arctic Security Studies Center would be to find solutions for the greatest security challenges of the Circumpolar Arctic region while promoting greater engagement to addressing the challenges that lay ahead.

The DoD currently has five academic Regional Centers for Security Studies which cover the regions of Europe, Asia-Pacific, Africa, Near East-South Asia, and Northern Hemisphere. The centers aim to support defense strategy objectives and policy priorities through a unique academia forum and to foster strong international networks of security leaders.

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