Russia’s Rosneft Delays Arctic Mega Oil Project Due to Sanctions, Shortage of Oil Tankers

Russian oil major Rosneft has delayed the commissioning of the Vostok Oil project until 2026, in part due to a shortage of ice-capable oil tankers as a result of Western sanctions. Earlier this year the U.S. announced sanctions aimed at slowing down or halting the construction and logistics operations of the project. 

Vostok Oil is being constructed on the shores of the Arctic Ocean in Siberia. With a total investment in excess of $100bn it constitutes the largest oil development project in the world over the past two decades and the largest in Russia since the 1980s.

The remote location of the project, far from domestic consumers and international markets renders exports via pipeline infeasible. Instead oil will flow via Russia’s Northern Sea Route on board of ice-capable oil tankers. 

Vostok Oil will require up to fifty high ice-class vessels to ensure year round access to the loading terminal in Sever Bay. An initial order for 10 vessels with Russia’s Far East Zvezda shipyard has seen little progress and not a single vessel has been delivered. Western sanctions have complicated Rosneft’s ability to procure ice-capable shipping in foreign yards. 

With the European market off limits to Russian oil, production will primarily be destined to Asia. India has emerged as the second-largest buyer of Russian oil now accounting for 40 percent of the country’s oil purchases.

This week Rosneft agreed to a 10 year deal with Indian refiner Reliance for delivery of 500,000bpd of various grades. The contract is valued at $13bn a year at current prices.

During phase 1 the project is designed to produce 30m tonnes of oil per year, with production to scale up to 50m tonnes by 2027 and 100m tonnes in 2030 under the original timeline. At full capacity the project is envisaged to contribute close to 20 percent of Russia’s total oil production. With total reserves of 6.5 billion tonnes, in addition to 10 trillion cubic meters of gas, Vostok Oil is intended to produce well into the second half of this century. 

Construction of onshore infrastructure started in July 2022 and the company continues work on a 770 km long pipeline from the Payyakha and Vankor oil fields to the Sever Bay export terminal.

Satellite images show the transformation of undeveloped Arctic tundra into a major industrial facility over the past two years. During the summer navigation season of 2023 and 2024 cargo vessels delivered more than 2m tonnes of construction supplies to Sever Bay. This past summer oceangoing and river barges completed more than 700 supply voyages. Work on a 335 meter-long long pier at the oil loading terminal was completed during 2024.

Similar to Novatek’s liquefied natural gas operation, Rosneft aims to employ transshipment terminals in Russia’s Far East to reduce the distance its icebreaking oil tankers will have to travel. Once outside ice-covered waters oil will be transferred to conventional carriers.

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