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Analysis: Russia's northern oil exports

Seeking new outlets, Moscow intends to expand oil exports from its northern ports of Murmansk and Archangel, but quite aside from climactic difficulties, a collateral issue is building both tankers and icebreakers able to withstand the punishing environmental conditions prevalent in the Barents and White seas.
by John C.K. Daly
Washington (UPI) Feb 28, 2008
The good news for Russia is that energy prices are at a world record, and that Russia is now tied neck and neck with Saudi Arabia as the world's leading oil producer, producing around 9 million barrels per day to a world consuming about 84 million bpd. Russia is the largest non-OPEC oil producer and now generates 12 percent of global production.

The bad news is that Russia's major export routes are running at full capacity. Russian energy exports to the four cardinal points of the compass all represent varying degrees of difficulties. Eastward, exports to China are still largely miniscule and move by rail until a new pipeline is complete. To the south, two routes exist -- southward across the Caspian, where oil swaps with Iran remain minor, while shipments from Russia's Black Sea Novorossiisk port, approximately 1.2 million bpd, must transit the Turkish Straits, and Ankara has vociferously protested increase in tanker traffic.

Westward, Russia relies on its Soviet-era Transneft pipeline network to serve its European customers and its new Baltic Primorsk oil terminus, which accounts for 1.5 million bpd. Seeking new outlets, Moscow intends to expand oil exports from its northern ports of Murmansk and Archangel, but quite aside from climactic difficulties, a collateral issue is building both tankers and icebreakers able to withstand the punishing environmental conditions prevalent in the Barents and White seas. Norway has strenuously objected to Russian proposals to increase tanker traffic along its Northern Cape, but in reality there is little that Oslo can do, as the route represents Russia's sole unfettered route to ocean access. Russian Minister of Transport Igor Levitin acknowledged as much, saying on Feb. 21, "We have two ports which lead directly into the ocean -- the Port of Murmansk which leads right into open sea and Nakhoda in the Far East," adding all other Russian ports located either in southern Russia or on the Baltic are constrained by passing through straits.

As some surveys indicate that Russia's Arctic regions contain up to a quarter of the world's oil and gas reserves, the Russian government has big plans for Murmansk, where, despite its latitude, the Gulf Stream keeps its channels ice free. Federal Agency of sea and river transport adviser Aleksandr Ushakov said development of the Russian North is a priority for the country's development in the 21st century. An international consortium has proposed a pipeline and port facility near Murmansk costing $5.1 billion to $5.7 billion for receiving Western Siberian oil for transshipment to very large crude carrier tankers, while another project calls for Moscow to construct a new pipeline from Russia's northern oil fields to the Barents Sea port of Indiga, with an annual handling capacity of 12 million tons. Archangel is also due to receive an oil export terminal capable of handling 4.8 million tons of exports annually.

The severe climactic conditions have forced the Russian government, oil and shipping companies to spend on a new generation of reinforced ice-class shuttle tankers and icebreakers. Rosneft has already commissioned several ice-class shuttle vessels for its operations between the Prirazlomnoye oil field, 40 miles south of Novaia Zemlia and Murmansk's Belokamenka terminal.

The new vessels won't be cheap. Association of Polar Explorers of the Russian Federation Vice President Nikolai Kornilov estimated that in order to construct a new icebreaker fleet for the Arctic regions, the Russian Federation by 2020 would be forced to spend $3.27 billion, as many Russian icebreakers date from the Soviet era and were built in 1970-80s. Shipbuilding plans call for construction of at least nine "Arctic"-class nuclear icebreakers and the three "Taimyr"-class vessels, in addition to a number of new LC-60IA-class nuclear ships. The first LC-60IA icebreaker is due to be commissioned by 2016; by 2020 plans call for a total of four.

Norway is anxiously watching the developments, especially Russia's proposal for a new class of nuclear icebreakers. There are good reasons for Oslo's nervousness. The Barents Sea is Europe's largest fishing ground, with 60 percent of its catch, primarily cod, ending up in the European Union. The Iabolokov Report, commissioned by Boris Yeltsin's government and released in March 1993, estimated that the Soviet Union in its lifetime dumped 2.5 million curies of radioactive wastes in the Arctic, including 16 decommissioned maritime nuclear reactors. The Norwegian environmental group Bellona puts the number at 21, nine of which still contained their fuel rods. In April 1989 the Soviet nuclear submarine Komsomolets sank near Bear Island in the Barents Sea. In 2000 the sinking of the Russian Federation's nuclear ballistic submarine Kursk in the Barents Sea raised fears in Oslo of possible environmental damage to its Kildenbaken fishing grounds. In August 2003 the decommissioned Soviet K-159 nuclear-powered submarine foundered in the Barents Sea while being towed to a navy scrap yard.

If Russian plans are implemented, then Norway's beleaguered cod stocks in Kildenbaken will be under assault not only from nuclear pollution, but oil as well, and Britain's favorite cod and chips national dish may soon become a luscious memory.

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Petroplus Announces Formation Of Growth Vehicle For US Refinery Acquisitions
Zug, Switzerland (SPX) Feb 28, 2008
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