Access to NSR remains open for LNG transit in January

Transit of the Northern Sea Route (NSR) has extended into January from the end of last year, when navigation was expected to stop, with the 172,600m³ Christophe de Margerie indicating delivery for China through the passage.

The vessel cast off from Russian independent Novatek's 16.5mn t/yr Yamal facility on 5 January and is declaring arrival for China's Dalian import facility on 26 January, Vortexa data show. Novatek had previously said that the Yamal project would continue delivering LNG along the NSR until the end of December, amid a wide inter-basin des price differential incentivising quick shipments to the Pacific. That said, only one vessel used the NSR in December, while six transshipment operations took place at European terminals for deliveries to northeast Asia.

Russia's Rosatomflot, which operates the NSR, was planning to conduct test transits of its nuclear icebreaker 60MW Arktika in January-February. But it has been moored at Russia's Murmansk port since 15 December, vessel tracking data show, although Rosatom's existing Yamal nuclear icebreaker may have assisted the Christophe De Margerie out of the Kara Sea.

Limited availability of icebreakers may have prevented a more extensive use of the NSR in recent weeks, although the most recent report from the Northern Sea Route Administration — published on 31 December — had signalled that nearly all parts of the NSR were clear of drifting ice, with thin first-year drifting ice only reported in the Mys Uelen area in the eastern Chukchi Sea. The Arktika is the first of five icebreakers to be delivered as part of Russia's project 22220.

The NSR was open to LNG transit for a record high of nearly eight months last year, with the first journey, also made by the Christophe de Margerie, taking place in mid-May. The passage had only been accessible in late-June until mid-October in previous years, with the final transits having left Yamal on 18 October in 2018 and 2 October in 2019.

Yamal volumes for delivery to northeast Asia are typically transshipped at European terminals when the NSR is closed, with the first leg to Europe completed by one of Yamal's fleet of ice-class vessels and the second leg carrying the transshipped Yamal cargo then completed on a standard LNG carrier, which might be chartered from the spot market.

But extremely tight spot tonnage availability in the Atlantic basin, amid a steep rise in near-curve northeast Asian des prices in recent weeks expanding the inter-basin differential and delays at the Panama Canal, has pushed up shipping costs for deliveries to the Pacific, increasing the incentive for Yamal offtakers to continue using the NSR, where possible. Shipping costs for Yamal deliveries through the route are approximately $2-2.50/mn Btu, Novatek said in December, and deliveries to northeast Asia through the NSR require approximately half the time of the traditional route through the Suez Canal.

The spot TFDE west of Suez day rate for fixtures in February was assessed at $155,000/d on 31 December, up from $81,000/d on 4 December and higher than the average spot charter rates of $54,425/d in February last year. At present, at spot charter rates, shipping a cargo from the transshipment terminal in northwest Europe to China would cost $3.36/mn Btu, based on Argus Round Voyage rates.

By Ellie Holbrook