Russian hydrocarbon (Oil and Gas and Coal) Industry: News #4

Coal prices in the West have more than doubled. This supposed discount is probably vs the market price in the West. Even after the discount the price of Russian coal would be more than before the sanctions.

I think there is little point in developing more new natural gas blocks in large amounts.

Russia should just expect European market to be out for the count for the most part. Chinese exports will replace European ones but no major new capacity expansion is required as would be if Russia was selling to both Europe and China as originally planned.

Russia should continue investing in making its own LNG infrastructure to complement the Power of Siberia 2 flows and other pipelines to China. And they should invest in long term oil storage so they would not be as vulnerable to major price fluctuations in the market.

Further oil pipelines to China also need to be built to reinforce further the ESPO flows. There is a major price differential between oil sold to Asia and oil sold to the European side and efforts should be made to move oil flows to Asia. China is a major customer and there is possibility of other countries being oil customers like Indonesia, Vietnam, or India in the future.

Earlier this week, during an interview to CNN India’s Petroleum and Natural Gas Minister, Hardeep Singh Puri, reiterated that India sees no “moral conflict” in importing Russian oil. He added that excluding Russian oil from the world market could lead to a crisis and a price spike towards $200 per barrel. He said that India would buy oil and gas from whatever source it can as the government has a “moral duty” to keep its people supplied with energ

India's moral duty is to the Indian people only, not fat, arrogant, homosexual American and European deviants with a hard-on for Russia's demise.

https://www.zerohedge.com/markets/arctic-silk-road-comes-alive-russia-sends-oil-china

'Arctic Silk Road' Comes Alive As Russia Sends Oil To China
Nov 09, 2022

Western energy sanctions against Russia have helped Moscow achieve the second-ever sail of a crude tanker east through the Arctic Circle toward China, a route dubbed 'Arctic Silk Road,' that could one day revolutionize energy trade flows from Russia to Asia because it's about half the time versus Russia's Baltic ports through the Suez Canal.

Vessel tracking data compiled by Bloomberg shows the Vasily Dinkov, a specialized ice-breaking tanker, departed from Murmansk, a city in northwestern Russia, off the Barents Sea, hauling a cargo of crude. The vessel traversed Russia's northern coast between Oct. 27 - Nov. 4 and entered the Bering Strait, a strait between the Pacific and Arctic Oceans that separates Alaska and Russia, on Nov. 5.

As of Tuesday morning, the tanker is full speed ahead off Russia's Kamchatka Peninsula. Its final destination is the Chinese port of Rizhao on Nov. 17.

"The journey is the shortest passage between Europe and east Asia, taking half the time to reach China from Russia's Baltic ports than the conventional route through the Suez Canal," Bloomberg said.

Even before the war in Ukraine and the resulting sanctions on Moscow, trade flows were already in the beginning stages of shifting towards the Northern Sea Route.

In 2017, we noted, "transit routes through the Arctic will assume a certain level of importance vis-à-vis the global geopolitics of Russia and China."

Visual Capitalist's Nicholas LePan published a map of all the critical routes and resources in the Arctic in 2019.

In early 2020, we detailed how Russia, owner of the world's largest fleet of icebreakers, can plow through Arctic waters, clearing the way for vessels to traverse the northern routes.

And last year, we cited Minister of National Resources and Environment Dmitry Kobylkin, who said cargo shipping in Russia's northernmost territorial waters would top 80MM tons as early as 2024.

However, there are significant logistical hurdles that rely entirely on weather conditions.

Richard Matthews, head of research at E.A. Gibson Shipbrokers Ltd. in London, told Bloomberg that the Northern Sea Route is only viable in the warmer period of the year.

   "It looks unlikely that any significant volumes could be shipped along this route until summer," Matthews said.

But Viktor Katona, a lead crude analyst at Kpler, said once spring arrives, the Northern Sea Route will be of "vital prevalence":

   "Europe is already sealed off.

   "If they're not buying, why circumnavigate the entire universe if you can use the Northern Sea Route to get to China in 20 days?" Katona said.

The first crude shipment across the Northern Sea Route took place in 2019. The second is currently underway. And as Western sanctions against Moscow rejigger global energy supply chains, Russia will have an advantage via the Arctic during warmer periods of the year in sending crude and crude products to Asia in an expedited fashion.

Also, these are kind of old news, but will become relevant once the G7 sanctions on Russian oil exports kick in.

Russia has been moving Sovcomflot ship registration from unreliable "partners" to friendlier places. And it looks like the Western financial insurance sector will stop being able to milk Sovcomflot ships for insurance since Russia now has their own insurance. Thanks to the sanctions one more Western financial capital teat will be cut.

https://www.reuters.com/world/india/exclusive-russian-oil-tankers-get-india-safety-cover-via-dubai-company-2022-06-22/

Russian oil tankers get India safety cover via Dubai company
NEW DELHI/LONDON, June 23 (Reuters) - India is providing safety certification for dozens of ships managed by a Dubai subsidiary of top Russian shipping group Sovcomflot, official data showed, enabling oil exports to India and elsewhere after Western certifiers withdrew their services due to global sanctions against Moscow.

Certification by the Indian Register of Shipping (IRClass), one of the world's top classification companies, provides a final link in the paperwork chain - after insurance coverage - needed to keep state-owned Sovcomflot's tanker fleet afloat and delivering Russian crude oil to overseas markets.

Data compiled from the IRClass website shows that it has certified more than 80 ships managed by SCF Management Services (Dubai) Ltd, a Dubai-based entity listed as a subsidiary on Sovcomflot's website.

An Indian shipping source familiar with the certification process said most of Sovcomflot's vessels had now migrated to IRClass, via the Dubai arm.

Shipping industry publication TradeWinds reported last week that most of the Sovcomflot international tanker fleet that was declassified due to sanctions had been transferred to IRClass in April and May.

Classification societies certify that ships are safe and seaworthy, which is essential for securing insurance and for gaining access to ports.
...
India's ship certifier is one of 11 members of the International Association of Classification Societies (IACS), top-tier certifiers that account for more than 90% of the world's cargo-carrying tonnage.

The Russia Maritime Register of Shipping was also part of the group until March, when its membership was withdrawn following a vote by 75% of IACS' members. Membership in IACS, which sets technical standards, typically makes a certifier more attractive for insurers, ports, flag registries and shipowners seeking safety assurances.

The four leading IACS members, from the UK, Norway, France and the United States, have stopped services to Russian companies due to the sanctions.
...
Sovcomflot's chief executive told reporters last week that the group had insured all its cargo ships with Russian insurers and the cover met international rules.

People familiar with the situation told Reuters this month that state-controlled Russian National Reinsurance Company had become the main reinsurer of Russian ships, including Sovcomflot's fleet.

https://www.reuters.com/business/energy/exclusive-russias-state-owned-rnrc-reinsure-russian-oil-shipments-sources-say-2022-06-10/

Russia's state-owned RNRC to reinsure Russian oil shipments, sources say
LONDON, June 10 (Reuters) - State-controlled Russian National Reinsurance Company (RNRC) is now the main reinsurer of Russian ships, including Sovcomflot's fleet, after Western insurance firms withdrew cover for Russian shipowners, three people familiar with the matter told Reuters.

Insurance is essential for maritime transport, particularly oil cargoes that require the highest safety standards due to the risk of spills and shipping flammable material on the high seas.
...
Western insurers withdrew cover from state-run Sovcomflot (SCF) when Russia's biggest shipping group was hit by sanctions, but Western insurance sources said the Russian replacement cover would likely be enough to keep Russian vessels sailing.
...
The sources, who declined to be identified due to the sensitivity of the issue, said Russian central bank-controlled RNRC was now the main company providing state guarantees to Russian insurance firms that offered cover such as Ingosstrakh, which insures Russian tankers, including SCF's fleet.
...
Russia's central bank said in March it had raised RNRC's capitalisation to 300 billion roubles from 71 billion roubles and hiked its guaranteed capital to 750 billion roubles so the firm had adequate resources to provide reinsurance.

"The increase in RNRC authorised capital will give Russian insurers wider opportunities to reinsure risks inside Russia, build additional reinsurance capacities, and manage new sanctions risk," it said in a report.

Ships are commercially required to have protection and indemnity (P&I) insurance, which covers third-party liability claims including environmental damage and injury. Separate hull and machinery policies cover vessels against physical damage.
...
Two tanker market sources said RNRC's capitalisation would allow it to act as a reinsurer for Russian ships on the international market without involving Western companies.

One source said similar insurance guarantees were provided by the Iranian authorities when Western insurance companies were unable to insure tankers with Iranian oil amid sanctions.

Russian guarantees were likely to satisfy countries still buying Russian oil, another of the Western insurance industry sources said, after the United States banned Russian oil imports and the European Union agreed to gradually introduce a ban.

Most Russian oil exports, in particular those on Sovcomflot tankers, are bound for Asian ports, mainly India and China, neither of which have imposed a ban on working with Sovcomflot.

Indian authorities have already accredited Ingosstrakh as an insurance company for shipping oil, which means vessels the company insures can enter Indian ports.

Russia sells natural gas to Azerbaijan so they can sell natural gas to Europe...

November 18, 2022
Gazprom starts deliveries to Azerbaijan

Gazprom has started deliveries of Russian gas to Azerbaijan under a new contract, the gas concern said today.

The contract was signed between Gazprom Export LLC and the State Oil Company of the Republic of Azerbaijan (SOCAR). Under the agreement, Gazprom will supply 1 billion cubic meters of gas until March 2023.

Azerbaijan, one of the major oil and gas producing countries, began supplying gas to Europe on December 31, 2020. This became possible after the launch of the Trans-Adriatic gas pipeline. TAP is the final leg of the €34.5 billion Southern Gas Corridor project as an extension of the Trans-Anatolian Natural Gas Pipeline (TANAP). The TANAP gas pipeline stretches from Azerbaijan through Georgia and Turkey to the Greek border. Part of the gas went through it to Europe through Turkey since the summer of 2018.

From December 2020, Azerbaijan began to directly supply gas to Europe - to Greece and further across the sea to southern Italy. In the next 25 years, Azerbaijan will supply Europe with more than 10 billion cubic meters of gas annually. Of these, 8 billion cubic meters each year go to Italy, and another 2 billion go to Greece and Bulgaria in equal shares.

On September 2, 2022, President of Azerbaijan Ilham Aliyev announced a plan to double the capacity of the TANAP gas pipeline through Georgia and Turkey to Europe - up to 32 billion cubic meters of gas annually.

https://www.vesti.ru/finance/article/3049324

The Russian government has announced that it will not sell any oil to participants of the oil buyer cartel and will reduce oil production
if it has to. This is a clear signal that it is not desperate for oil revenues. But the retards in NATzO will ignore this and keep at it with
their sanctions inanity.

I think one of the reasons why Russia is not in a hurry to wrap up the war in Ukraine is because the economic pain signal still hasn't
arrived in the "brain" of NATzO.

China finished construction of a tunnel under the Yangtze river. This will be used to bring gas from Power of Siberia all the way to Shanghai once the pipeline is completed in 2025.



Key project of China-Russia east-route natural gas pipeline is completed
Dec 04, 2022
A key construction project of the China-Russia east-route natural gas pipeline was completed on Saturday. It will allow Russian gas to cross the Yangtze River to reach Shanghai, laying the foundation for the full completion of the landmark China-Russia energy cooperation project.

The under-river tunnel across the Yangtze River, a key control project of the pipeline, was completed after 28 months of construction, according to PipeChina.

The tunnel has a length of 10.226 kilometers and is designed with three natural gas pipelines with a diameter of 1,422 millimeters each, according to media reports.

By adopting environmental protection measures such as a mud-water balanced shield and sealed shipping of wastes, the project builders made every effort to protect the wetland along the banks and the ecology of the Yangtze River.

The completion of the project moves a step nearer to the full operation of the China-Russia east-route gas pipeline and is conductive to secure China's energy supply amid rising global prices, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Sunday.

The whole pipeline is scheduled to provide China with 38 billion cubic meters of Russian natural gas annually from 2024 under a 30-year contract worth $400 billion under a deal signed between the China National Petroleum Corp and Russian gas giant Gazprom in May 2014, according to the Xinhua News Agency.

The Yangtze tunnel is the key to the east-route natural gas pipeline, which is expected to be completed and put into operation in 2025, media reports said.

The full pipeline spans more than 8,000 kilometers, with a 3,000-kilometer section in Russia and a 5,111-kilometer stretch in China.

The northern section from Heihe, Northeast China's Heilongjiang Province to Changling in Northeast China's Jilin Province was put into use in 2019. The middle section from Changling to Yongqing in North China's Hebei Province became operational in 2020.

"The project offers a successful example of mutual benefit and win-win international cooperation, and it combines the advantages of Russia's abundant resources with China's vast market," Lin said.

Lin noted that in the context of the Ukraine crisis and China's effort to optimize the country's energy consumption structure, there should be greater opportunities for China-Russia cooperation in the future.

Chinese Vice Premier Han Zheng on Tuesday called for deeper China-Russia energy cooperation at the opening ceremony of the fourth China-Russia Energy Business Forum.

China and Russia should forge a closer energy cooperation partnership, and make greater contributions to improving the well-being of the two peoples and promoting global energy security and sustainable development, Han said.

https://www.globaltimes.cn/page/202212/1281057.shtml

Each of those three pipes has same diameter as the pipe in Yamal pipeline (Russia-Belarus-Poland-Germany).
Yamal pipeline carries up to 33 bcm/y. So this would be 99 bcm/y. I assume they are building this already with consideration of future flows from other pipelines. I agree. It is gigantic. Especially when you consider that not all the gas from Power of Siberia will be consumed in Shanghai area, since there are other cities along the way including Beijing-Tianjin and their whole rust belt.