Summary of Working Paper No. 48-1996

III.07.3: Marine Transportation of oil from Timan Pechora and from inland Russian oil fields.

By Dag Andresen and Anders Backlund, Kværner Masa Yards Technology, Helsinki, Finland.

Condensates and Petrochemical Products

Sections 1 and 2 The LPG market and Seaborne transportation of LPG from the Ob Gulf

As part of INSROP Sub-program III, a study has been made concerning seaborne export of liquefied petrol gas (LPG) from Northern Russia, especially the West Siberian fields in Tyumen. The main purpose of the total project III.07.03 was to evaluate the economic viability of seaborne export from this area to the European region, mainly with the use of a special ice-strengthened LPG vessel, constructed and designed for such seaborne operations. Section 1 concentrates on the LPG-market, while section 2 studies in more detail the seaborne transportation of LPG from the Ob Gulf to the European market, comparing it to a possible alternative supply.

Section 1 studies the regions that are potential exporters, importers and buyers of seaborne exports of LPG from Tyumen. Currently large quantities of liquefied petrol gas are flared off at the West Siberian fields due to insufficient infrastructure, lack of modern processing capacity and capital. Preliminary investigations indicate that condensates/LPG can be obtained marginally above local transport cost. Although large quantities are being flared off, a number of gas processing plants, nine in total, are in operation by the Sibneftegaspererabotka Corporation (SNGP), the main products being polyethylene variants. SNGP, formed in 1975, transports gas from the separation units and processes it. The regional surplus of LPG, however, is estimated to increase to 700.000 metric tonnes by 1995 for which limited transportation capacity exists.

When studying the LPG balance in the world, the following results can be obtained:

Positive Balances

Middle East: Of the countries with surplus production Saudi Arabia had the highest volume of LPG free for export in 1994. This was helped by the removal of OPEC production quotas so that Saudi Arabia could help to make up the deficit caused by the loss of Iraqi and Kuwaiti production. The other Middle Eastern exporters include Sharjah, Qatar, Abu Dhabi and Dubai. The increase in net deep-sea export is expected to continue during the next five years as table 5A indicates. African LPG production rose in 1994 due to increased capacity and demand from importers such as North America, Latin America and Western Europe, in addition to the increasing domestic demand. From North Africa, seaborne exports are likely to grow over the next five year period as the net balance shows in table 5B.

Negative balances

Japan: Of the countries reporting a negative balance Japan continues to be the largest importer of LPG with a predicted shortfall in supply of approximately 20.0 million tonnes in 2000.

The USA: This country has the second largest negative balance at 3.493 million tonnes, (if we divide Europe into South and North). Most of the LPG imports to the USA are overland from Canada and some from Mexico. Therefore the deep-sea requirement is much less significant than Japan.

Western Europe: The negative balance in Northern and Southern Europe together is predicted at 5.032 million tonnes in 1996, showing decreasing negative seaborne export and an increasing need for seaborne import towards 2000. In Europe the UK and Norway were the only major exporters of LPG.

When studying the feasibility of LPG supply from the Ob Gulf, it can be concluded that the most critical point is the price of this liquefied gas delivered free on board. In addition, further investigation and evaluation about storage and loading costs in Novy Port have to be done before these additional costs can be taken into consideration.

With first hand assumptions made on the cost level, it can be concluded that there seem to be potentials in the supply of LPG from Ob to the European market.

Concerning the question of whether western shipowners will invest in ice-strengthened tonnage to participate in such shipments, the answer remains open. But, positive responses have been received, when presenting some key information on this work to major Norwegian LPG operators and ship owners. At this stage, their company names and attitudes to such transport solutions are off the record information. But, first of all, somebody must show that traffic with big LPG, LNG or oil carriers from the Arctic areas is profitable, regular and safe.