Russian natural gas rides polar thaw

Written by New York Times | Russia | Updated: Jul 26 2013, 09:31am hrs
The polar ice cap is melting, and if executives at the Russian energy company Novatek feel guilty about profiting from that, they do not let it be known in public. From this windswept shore on the Arctic Ocean, where Novatek owns enormous natural gas deposits, a stretch of thousands of miles of ice-free water leads to China. The company intends to ship the gas directly there. If we dont sell them the fuel, somebody else will, Mikhail Lozovoi, a spokesman for Novatek, said.

Novatek, in partnership with the French energy company Total and the China National Petroleum Corporation, is building a $20-billion liquefied natural gas plant on the central Arctic coast of Russia. It is one of the first major energy projects to take advantage of the summer thawing of the Arctic caused by global warming.

The plant, called Yamal LNG, would send gas to Asia along the sea lanes known as the Northeast Passage, which opened for regular international shipping only four years ago.

Whatever blame for the grim environmental consequences of global warming elsewhere in the world that might be placed on the petroleum industry, in the Far North, companies like Novatek and Total, Exxon Mobil of the US and Statoil of Norway stand to make profit.

Its a reality of what is available today, and commercially it is a route that cuts cost, Emily Stromquist, a global energy analyst at the Eurasia Group, said.

Because of easing ice conditions and new hull designs, the tankers will not even require nuclear-powered icebreakers to lead the way as is the practice now except through the most northerly straits.

In addition to making it easier to ship to Asia, the receding ice cap has opened more of the sea floor to exploration. This has upended the traditional business model of using pipelines to Europe. Thawing has proceeded more slowly in the Arctic above Alaska, Canada and Greenland, but one day what is happening in Russia could happen there.

In Russia, the mining company Norilsk can now ship its nickel and copper across the Arctic Ocean without chartering icebreakers, saving millions of roubles for shareholders.

In northwest Alaska, the Red Dog lead and zinc mine moves its ore through the Bering Strait, which is less

often clogged with packed ice than in past decades.

What is new in the Novatek project is an oil industry business plan that relies explicitly on the Northeast Passage. Though Russian ships have moved goods along the countrys sprawling Arctic coastline for more than a century, and the route was opened to international shipping in 1991, it became apparent only recently that climate change would make the trip profitable.

Novatek has said it needs bank guarantees for $16 billion in project financing, while it and its partners will finance the rest. To secure these loans, the firm needs a change in Russian law lifting Gazproms monopoly for exports. President Putin, in a speech at an economic conference, said the law would change before this year was out, signalling that Yamal LNG had full Kremlin backing.