Russia to reshape Europe's oil market

Last year, Rosneft launched Vostok Oil - the largest hydrocarbon production project in the global oil and gas industry. The resource base of the project is located on the north of the Krasnoyarsk Territory. The reserves amount to over 6 bln tons of premium sweet oil.

The design solutions provide for the complete utilization of associated petroleum gas. Thus, the carbon footprint will be 75% lower than that of other major new oil projects in the world. Wind power generation will be used to supply power to the Vostok Oil facilities. The project's competitive advantage is its proximity to the Northern Sea Route. Its use opens up the possibility of supplying raw materials from the Vostok Oil fields in two directions at once: to the European and Asian markets. The implementation of the project will ensure the fulfilment of the task of increasing the cargo traffic along the Northern Sea Route to 80 mln tons by 2024.

In June, during the 24th St. Petersburg International Economic Forum, Rosneft signed over 50 contracts for the implementation of the project totalling 558.8 bln rubles. The prospect of Vostok Oil is confirmed by the interest of international investors: a large international trader Trafigura acquired a 10% stake in the project. Rosneft also agreed on the terms of selling a 5% stake in the project to the Vitol and Mercantile & Maritime companies consortium.

According to Reuters, Russia has placed its bets on its biggest oil project since the fall of the Soviet Union to push aside rival Middle Eastern, West African and U.S. grades in core European markets and provide much-needed revenues. Demand for oil, however, is uncertain as the world seeks to wean itself off fossil fuels to limit global warming and many European refiners are expected to decrease runs. Russia is aiming to meet the demand it expects to remain with its new light, low sulphur, easy-to-refine grade - distinct from its flagship heavy Urals grade.

The quality of the new Vostok crude grade, which has yet to be named, will be similar to that of North Sea grades Brent and Troll. It will have sulphur component of less than 0.05% and a density of about 40 American Petroleum Institute (API) degrees, according to Rosneft, making it suitable for most refineries in Europe. As North Sea oil production from mature fields has declined, European refiners have purchased light sweet barrels from outside the region. Traders said they could well favour the new Vostok crude, provided it is of the expected quality, over the Middle Eastern, African and U.S. grades they have been buying because transport costs would be lower.

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According to Rosneft, geological exploration is currently underway to prepare the Vostok Oil resource base, building of oil collecting facilities, the main pipeline (770 km long), and an oil loading terminal at the Bukhta Sever port. The first stage of the port construction provides for the possibility of shipping up to 30 ml tons of oil per year. By 2030, after the implementation of the second and third stages of construction, the volume of oil transhipment will increase to 100 mln tons.

To organize the transportation of products at the Zvezda shipyard, an order has been placed for a series of 10 high-ice class tankers Arc7. In general, for the implementation of the Vostok Oil project, it is planned to build 50 vessels of various classes, including tankers, gas carriers, supply vessels. A long-term contract was signed for the supply of up to 100 Russian-made drilling rigs.

As part of the project, it is planned to build power generation facilities with a capacity of 3.5 GW, three airfields, two sea terminals, 15 fishing towns, and a large-scale renovation of the Yenisei river infrastructure. The implementation of the Vostok Oil project will give an impetus to the development of related sectors of the economy, such as mechanical engineering, metallurgy, power engineering, road construction, shipbuilding, and will have a significant ripple effect, ensure high profitability and meet the growing needs of the world economy in environmentally friendly energy resources, the company hopes.