|Bid||0.00 x 100000|
|Ask||0.00 x 20000|
|Day's Range||1,306.20 - 1,342.60|
|52 Week Range||1,047.40 - 1,382.20|
|Beta (3Y Monthly)||0.59|
|PE Ratio (TTM)||0.46|
|Earnings Date||Feb 18, 2020 - Feb 24, 2020|
|Forward Dividend & Yield||31.04 (2.33%)|
|1y Target Est||1,136.04|
(Bloomberg) -- Russia wants to make its Arctic waters more attractive to shippers than the Suez Canal and could be willing to compensate for potential risks to make that happen.President Vladimir Putin has made development of the Arctic one of Russia’s top long-term priorities and huge projects to export liquefied natural gas via the Northern Sea Route have already lured investors above the Polar Circle. But shippers of other products remain reluctant to make the detour from the Suez Canal toward the Arctic due to multiple risks.To deliver a cargo via the Northern Sea Route today, a shipping company needs an ice-class vessel or an icebreaker and to pay insurance costs more than twice those for the Suez Canal, according to Russia’s Deputy Minister of the Far East and Arctic Development Alexander Krutikov.His ministry, together with Russian think-tank Skolkovo, is working on a project to create a state-run container ship operator. The company would cover the cost of any risks associated with transporting international cargoes via the Arctic’s icy waters, including possible delivery disruptions and higher insurance payments.“The state pays for the Arctic exposure and the shippers cover the remaining costs themselves,” Krutikov said in an interview. The resulting costs for shipping companies “should be lower than in the Suez Canal, at least at the first stage,” to promote the route.If the idea is implemented, the state container ship operator would be responsible for transporting cargoes across the Northern Sea Route, stretching more than 3,000 nautical miles between the Barents Sea at the Russian border with Norway and the Bering Strait near Alaska.Feeder ships from European and Asian ports could sail as far as Murmansk in the Barents Sea and Kamchatka in the Far East, bringing cargoes to transshipment points, according to Krutikov. From there, the Russian container operator would take responsibility for the cargoes, he said. “This significantly lowers transportation costs, as foreign companies will not need Arctic vessels,” and Russia could also keep transshipment costs competitive, Krutikov added.The national ship operator would be needed to accompany international shippers for at least a decade, “otherwise no one will use” the Northern Sea Route, he said. “At some point the shippers will get used to and understand the infrastructure, will become more interested and then we can stop covering the Arctic exposure and make the route commercial.”Higher CostsThe cost of transporting a Twenty-Foot Equivalent Unit, a standard measure of a ship’s cargo capacity commonly known as TEU, via the Northern Sea Route could be around 36% higher than via the Suez Canal, according to a 2014 presentation made by Tuomas Kiiski, a research manager at Finland’s University of Turku.Kiiski made the calculations by comparing approximate costs for an Ultra Large Container Ship making a trip from Rotterdam-Singapore-Shanghai-Busan-Yokohama-Rotterdam via the Suez Canal with costs for a much smaller Panamax making the same trip via the Northern Sea Route, he said in the presentation to the Arctic Frontiers conference.The calculations are simplified as the actual comparison is fairly complex “due to lack of precedents for commercial Europe-Asia container shipping activity,” Kiiski said in an email to Bloomberg. “The main hindrance of container shipping is that the requirements of liner shipping – regular year-round service, fixed schedules, schedule integrity, a network of intermediate ports and economies of scale – are not met” in the Northern Sea Route now, he said.If navigation in the Northern Sea Route is extended to around 225 days per year, it may be economically viable to use the Arctic link during that period and the Suez Canal for the rest of the year, a 2014 research paper for Kyoto University suggests.Today, international transit accounts for just a fraction of total cargo flows along the Northern Sea Route. The bulk of the 20.2 million tons of cargo which were shipped via the route last year was LNG from Novatek PJSC’s Yamal LNG plant and crude from Gazprom Neft PJSC’s Novoportovskoye field. By 2024, Russia aims to increase shipments via the Northern Sea Route to as much as 80 million tons per year.To achieve that target, Russia will have to deal with extremely harsh environmental conditions. At the moment, it’s not possible to navigate across the Northern Sea Route for more than four months of the year. For the rest of the time, the Arctic waters are covered with thick ice with temperatures which fall as low as minus 40 degrees Celsius (also minus 40 Fahrenheit). That requires costly ice-breaking vessels and still doesn’t guarantee safe delivery of cargoes, as unpredictable winds can bring heavy, moving pack ice onto the route.“The task is to make the Northern Sea Route safe and economically viable for shippers, attractive both in terms of quality and price,” Putin said at the international Arctic Forum in April. Russia aims to launch round-the-year navigation along the Northern Sea Route by 2030, according to media reports, citing a draft of the Arctic Development program.Russia’s round-the-year navigation plans may be aided by the changing climate as global warming is slowly freeing up the country’s transpolar conduit from ice packs. Last year, Russia’s meteorological service Rosgidromet recorded the highest average surface winter temperature in the nation’s sea Arctic zone since 1952. Various studies suggest that climate change may extend the ice-free navigation period via the Northern Sea Route by several weeks between 2030-2050, enough to make the route commercially attractive for shipping transit.Enormous TaskThe project to create a state-run container ship operator is still in its infancy. Russia’s Ministry for Far East and Arctic development expects the think-tank Skolkovo to complete research on potential infrastructure and budget costs by the end of this year. The results of the research will then be discussed and updated for another half a year, and the final decision on whether the project is needed or not is up to Russia’s leadership, Krutikov said.However long it may take to set up a Russian state-run container operator, the overall development of the Northern Sea Route is a “project, which will develop at least 100 years given its scale,” Krutikov, who turns 32 this year, said.Appointed as deputy minister three years ago, he isn’t intimidated by such a daunting task. “I strongly believe that you should align yourself with something that is bigger than your life, only then you can achieve maximum results,” Krutikov said.(Updates with a researcher’s comment in eleventh paragraph, climate change research in sixteenth paragraph)To contact the reporters on this story: Olga Tanas in Moscow at firstname.lastname@example.org;Dina Khrennikova in Moscow at email@example.comTo contact the editors responsible for this story: James Herron at firstname.lastname@example.org, Helen Robertson, Rakteem KatakeyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- News of more mysterious tanker attacks, this time in the Gulf of Oman, had their predictable effect on (otherwise lifeless) oil prices Thursday morning. But there’s another fuel that plies those troubled waters: liquefied natural gas, or LNG. What might conflict, or the threat of it, mean for one of the fastest growing bits of the energy business?The Middle East accounts for 29% of global LNG exports, centered on Qatar (the world’s largest exporter in 2018), Oman and the United Arab Emirates(2). Exports from Qatar and the U.A.E. must transit the Strait of Hormuz, the chokepoint near where the two tankers were hit(1).In theory, an extended conflict along the lines of the so-called tanker war of the 1980s could have a serious impact on the LNG trade. Just over 26% of all LNG cargoes passed through the Strait of Hormuz in 2018, according to data from BP Plc, close to the roughly 30% of oil flows estimated by the Energy Information Administration. Qatar accounts for the vast majority of those – and a large proportion of the imports taken by a number of countries outside the region:Besides interdicted cargoes of LNG, the presumably similar impact on oil tankers would also drive up LNG prices, as many supply contracts are indexed to oil.As my colleague Julian Lee writes here, outside of a broader war, Iran has little to gain from launching an all-out tanker war that would disrupt what’s left of its own sanctions-hit energy trade and would invite the destructive attention of the U.S. Navy. Even so, the threat of conflict or sporadic attacks like this could still have an impact on the LNG market.LNG is the engine driving bullishness in the global gas trade. Roughly 40% of the growth in global gas production through 2040 will involve flows moving between different regions, according to BP’s latest projections. Of that trade, LNG is expected to account for more than two thirds – and China, India and the rest of Asia dominate.For China, rising LNG imports offer a way to curb reliance on coal and its associated pollution. From a strategic point of view, however, they represent another leg of rising energy-import dependence – for a country that wasn’t exactly thrilled about that even before it got into a trade war with the U.S. China already relies on imports to meet more than 70% of its oil demand – a higher proportion than the U.S. even at its peak dependency in 2005 – and the country satisfied about 44% of its gas demand via imports in 2018. The latter looks certain to rise on current trends.As Stephen O’Sullivan writes in a recent report for the Oxford Institute of Energy Studies, China’s import dependency for oil is mitigated by the fact that oil is more fungible and that Beijing has already stocked a large strategic reserve of it. The biggest contrast with gas, however, is timing:The difference between rising oil import dependency and rising gas import dependency may relate, above all, to a contrast between the global political environment when China’s oil imports were initially rising strongly 10 years ago and the current political environment when the same volume growth has been true of gas. Clearly the situation is more fraught than a decade ago.LNG has already been caught up in the trade spat, with China having imposed a tariff on U.S. LNG cargoes. This effectively closes off an important avenue for China to diversify its LNG imports, the primary means of managing increasing import dependency.This changing environment could chill China’s appetite for more LNG cargoes – and that could reshape the energy outlook in multiple dimensions.Most obviously, if Qatari and U.S. cargoes are less desirable, then that helps other potential suppliers. Apart from those in the region, such as Australia and Malaysia, development projects in eastern Africa could benefit, as would long-stalled plans on Canada’s Pacific coast. Argentina, with its own shale-gas sector, could also benefit, with Wood Mackenzie pointing out the country’s peak potential LNG production in the summer months would coincide with strong winter demand from utilities in Asia.Equally, though, more piped gas from Russia and central Asia, as well as Russian LNG, would potentially look more attractive. The Power of Siberia pipeline is due to start deliveries to China soon, and strategic considerations could conceivably tip the scales on a second line. Notably, Chinese buyers have agreed to take a 20% stake in Novatek PJSC’s LNG project on Russia’s Arctic coast – a deal announced only a couple of months ago, after the tariff battle with the U.S. began.More drastically, though, China could well decide to deal with its exposure to potentially unreliable LNG cargoes by dialing back reliance on gas in general. That could cut several ways. Renewable energy, produced domestically and bolstering China’s own industrial base, is one obvious potential beneficiary. Tempering such hopes, however, is the fact that, despite a jump in renewable-energy production in China last year, the country also accounted for 30% of the growth in global consumption of another domestic fuel source it has in abundance: coal. The same story holds for India, another fast-growing market reliant on Qatar for a lot of LNG.Either way, this gets at the most pernicious aspect of even a simmering, rather than hot, conflict. Geopolitics might cause spikes in traded-energy prices in the near term, but tends to depress consumption over the longer term. A BP scenario released earlier this year surmised a roll-back in globalization would actually hit gas-demand growth harder than one involving a more rapid transition to lower carbon energy sources.Yet that scenario is starting to play out already. Besides potential disruption in the Middle East, the trade war and America’s shift toward a more openly mercantile stance under the rubric of “energy dominance” represent a fundamental break with the past. Only on Wednesday, President Donald Trump threatened sanctions against Germany over the long-delayed Nord Stream 2 pipeline, which he and a sizable contingent in Congress believe would leave this nominal ally overly dependent on Russian gas. The European Union must wonder how much of this is driven by real concern for its energy security and how much owes to a desire to export more “molecules of U.S. freedom” across the Atlantic – especially as Washington’s standoff with Tehran threatens an important LNG source that mitigates Moscow’s power in the continent’s energy market.Oil’s traditional, and varying, geopolitical risk premium is the last thing those LNG tankers should take onboard.(1) exports from a fourth, Yemen, havesuccumbed to war already(2) Oman’s own LNG facilities are further south, close to where the Gulf of Oman opens out into the Arabian Sea, so they are less exposed to attack.To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Six months ago, the group couldn’t reach a deal on production levels without help from Russia. Now it can’t even agree on the date of a meeting, and Russia seems to be the problem. A deal to extend a policy of output restraint was reached only after Russian oil minister Alexander Novak took over an office at the heart of OPEC’s headquarters in Vienna and brokered a compromise that both Iran and Saudi Arabia would accept.
As much of the rest of the world recognizes climate change as an emergency, Russia is working hard to capitalize on it — and the U.S. appears to be far behind. Ten disused military airfields have been reopened, and 13 more are being built.
Coming on top of a recent data revision that eliminated the 2016 recession, the recent numbers seem increasingly fishy, including to some government economists. On Dec. 20, President Vladimir Putin was asked at a news conference why Russia’s economic statistics looked rosier than people’s actual lives would suggest and whether the data could be trusted. Putin admitted the statistics were “not perfect” and needed to be improved.