Page 6 - GLNG Week 16 2022

GLNG COMMENTARY GLNG

Moscow’s race against time to

divert energy exports from Europe

POLICY EUROPE’S unprecedented push to sever all infrastructure it has.
energy ties with Russia has left Moscow scram- Russia delivers its crude oil to Asian markets
bling to re-orientate its vast oil, gas and coal via the Eastern Pacific-Siberian Ocean (ESPO)
exports to Asian markets. But achieving such pipeline, which has a capacity of 80mn tonnes
a monumental feat would likely take years, not per year (tpy), or 1.6mn bpd. ESPO consists of
to mention tens of billions of dollars in new a main pipeline that runs to the Far Eastern port
infrastructure, and Asian buyers may simply of Kozmino, where oil can be loaded onto tank-
not have the appetite of the ability to absorb the ers for export across the Asia-Pacific, and a spur
extra supplies. Nevertheless, Russia finds itself in that runs into China. However, this pipeline is
a race against time to redirect energy flows east- already working at full capacity, so any expan-
wards before taking too great a financial hit from sion of this would mean building a new pipeline.
Europe rejecting them. The other main option for crude deliver-
On April 19 Russian President Vladimir ies to China is through Kazakhstan, via the
Putin ordered his government to draw up plans 400,000 bpd Atasu-Alashankou pipeline.
by June 1 to switch Russia’s pipeline infrastruc- Atasu-Alashankou was originally built to han-
ture from west to east and build the necessary dle Kazakh oil, but since those shipments have
new energy infrastructure. fallen significantly in recent years, currently
Since it was set up in 1970s Russia’s existing amounting to only 20,000 bpd, the pipeline has
infrastructure has always been heavily geared been repurposed for transiting Russian supplies.
towards serving European markets and has Employing tankers is another immediate
long largely ignored delivery channels targeting and cheap option, as utilising the existing ports
Asia. The Soviet-era Druzhba pipeline and Rus- would not require any new investment. Among
sia’s north-west and Black Sea typically deliver the tanker projects, Russia can dispatch some of
around 5mn barrels per day of oil, condensate its crude directly to Asian markets on tankers,
and other petroleum products, while only about including the 240,000 bpd Sakhalin-1 project
2mn bpd are shipped to markets in Asia. in the Far East and the 160,000 bpd Novopor-
Likewise, Russia’s pipelines sometimes send tovskoye field in the Arctic. Russia’s only other
over 200bn cubic metres of gas to Europe, option for oil and oil product supplies to east-
whereas China – the only other major market ern markets is by rail, which is relatively uneco-
with a pipeline link to Russia – took only 10.5 nomic, but was used in the past by Yukos to sell
bcm last year. And the Power of Siberia that car- oil to China two decades ago.
ries that gas only came online in December 2019 The advantage of both ESPO and the Kazakh
after ten years of negotiations. route is that they can be used to send oil not only
Russia’s two main LNG export terminals in from Russia’s newly developed fields in Eastern
the Arctic and in the Far East are also very new Siberia but also from fields in Western Siberia
and can deliver an additional 38 bcm of gas on that until now have primarily served European
tankers to markets across the world, but mainly markets. But there are clear infrastructure bot-
Asia. Sakhalin LNG production started in 2009 tlenecks that would have to be overcome. For
and the first train of the Yamal LNG plant went years, ESPO has usually operated at close to its
online in December 2017. full capacity, despite successive expansions.
In percentage terms, Europe typically ESPO could be expanded again to handle
accounts for around 60% of Russia’s oil and extra deliveries to Asian markets, along with the
oil product exports and 70% of its gas exports. pipelines that feed it. But this would bear a sig-
Delivering oil and gas to Asia has very much nificant cost and could take years to implement.
been a recent development and remains small After all, it took a decade for Russia to expand
compared to Russia’s main business: selling ESPO from the initial 600,000 bpd capacity
hydrocarbons to Europe. it had when it was opened in 2009 to 1.16mn
bpd,at a cost of over RUB100bn ($1.2bn).
Oil Russia could also send extra oil and oil prod-
With the permanent loss of the European mar- ucts to Asia via railway, although capacity has
kets now a very real possibility that may happen already been strained due to the pandemic, and
in the next year, Russia is rapidly refocusing on Europe’s impending coal ban has not helped
building up what eastward-orientated pipeline matters. It could also deliver more oil from its

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