JUSTIFICATION OF ECONOMIC BENEFITS OF ARCTIC LNG TRANSPORTATION BY SEA

• Published in: Записки Горного института
• Main Authors: KOZʼMENKO S. Yu., MASLOBOEV V. A., MATVIISHIN D. A.
• Format: Article in Journal/Newspaper
• Language: English; Russian
• Published: Saint-Petersburg Mining University 2018
• Subjects: Arctic; natural gas; LNG; transportation cost; Arctic LNG projects; Mining engineering. Metallurgy; TN1-997; Pacific
• Online Access: https://doi.org/10.31897/PMI.2018.5.554; https://doaj.org/article/e4e033ac51f54c45873f81ee5fbdf80c

Russian Arctic is the largest exporter of domestic natural gas, which brings significant income to the federal budget. The major share of natural gas extracted in the Arctic is transported via pipelines in the direction of European countries. For a number of reasons EU is continuously reducing its consumption of Russian natural gas, among other things by increasing the import of liquefied natural gas (LNG). All this is happening against the background of global markets refocusing from pipeline gas to LNG. An obvious solution here would be to increase LNG production in the Russian Arctic with its subsequent transportation by sea. Taking into account remote location of Arctic gas fields from the main sales markets, there is a need for comparative cost analysis of transportation via pipelines and LNG tankers. The authors developed a method of assessing the costs of pipeline and sea transportation under comparable conditions. Calculations have been made for gas transportation to Germany, Italy, Turkey and China. As a result, it has been demonstrated that sea transportation of 1,000 m3 of natural gas is cheaper than pipeline transportation by the average value of 106.3 USD (–40.2 %) across all the routes in question. Performed calculations prove the economic benefits of sea transportation of Arctic LNG to the existing and potential markets for natural gas. Such results are justified by the need of rational replacement of pipeline gas by LNG in European markets (especially in Southern Europe, where LNG has a greater competitive advantage) and increasing export of liquefied natural gas to the Asia-Pacific Region. Suggested measures will allow to reduce the costs of sea LNG transportation, which will give Arctic natural gas a competitive edge on the global and regional gas markets.