LNG carrier Ribera del Duero Knutsen ice-classed

Norwegian LNG Carrier Chooses Ice over Pirates, Russia Opens Northeast Passage

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January 6, 2012

*Editor’s Note: Changed title to include Northeast Passage, not Northwest Passage as was originally reported.

OSLO (Dow Jones)–Russia has for the first time authorized a Liquefied Natural Gas tanker to sail through its Arctic waters from Europe to high-demand Asian markets, a route that requires about half the usual sailing time, potentially reduces costs and avoids the threat from Somali pirates.

Russia authorized the tanker Ribera del Duera Knutsen to sail along the Northern sea route from the Atlantic ocean to the Pacific ocean, Norwegian shipping company Knutsen OAS Shipping said.

In September, Russian Prime Minister Vladimir Putin said that he sees the future of the Northeast Passage “as that of an international transport artery” able to compete with other maritime routes on both fees, safety and quality.

From Europe, the route is a much shorter way to the Far East than sailing across the Mediterranean Sea and through the Suez Canal, which requires ships to sail through the ‘pirate alley’ in the Gulf of Aden north of Somalia.

It would save a lot of time and money, Knutsen’s Chartering Manager John Einar Dalsvag said, as current LNG rates are at a very high level of about $150,000 a day, so “days are expensive.”

Using the shorter Northern route means sailing in icy Arctic waters from the Barents Sea along Siberia to the Bering Strait, then on to Japan or other countries in the Far East.

Japan’s demand for LNG has climbed sharply after an earthquake and a tsunami knocked out several nuclear power plants in 2011. In December, only seven out of Japan’s 54 nuclear power plants were in operation because of safety concerns. Electricity production has largely been replaced by thermal power plants.

The LNG tanker’s journey along the Northern sea route to Japan would take about 20 days, according to Knutsen OAS Shipping, based in Haugesund, Norway. Due to the icy conditions, the ship must sail the route at some time between June and October, according to the company.

However, the company said the authorization only means the journey is technically possible, as it hasn’t yet signed any contract to deliver LNG by this route.

The Ribera del Duera Knutsen is the only LNG tanker with ICE-1A class notation from classification society Det Norske Veritas, which means it can handle ice thickness of up to 0.8 meters, according to the company.

Knutsen OAS Shipping has “studied all risks”, says Dalsvag, adding that such a journey would require two Russian icebreakers to accompany the ship.

The company said it hasn’t yet calculated what this would cost, or how much time and fuel this route would save them compared to the longer trip through the Suez Canal.

-By Kjetil Malkenes Hovland, Dow Jones Newswires

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