Russia halts Arctic oil business due to sanctions

Russia's Arctic oil production faces problems due to US sanctions

Russia's Arctic oil business is under threat due to sanctions imposed by the US on tankers and storage facilities. This has led to a halt in crude oil supplies, which were previously exported to Asian buyers, and to the accumulation of stocks in warehouses.

According to Reuters, three major fields – Novy Port, ARKO, and Varandey – are currently experiencing serious difficulties. The combined output of these projects is approximately 300,000 barrels per day, representing a significant portion of seaborne oil exports.

Logistics problems

Tankers and infrastructure involved in Arctic oil extraction possess unique characteristics adapted for operation in harsh northern conditions. However, US sanctions have affected key elements of this system, including the tankers "Umba", "Kola", and more than a dozen small shuttle vessels used to transport oil from the fields.

Among the sanctioned vessels are the "Shтурman Shcherbinin", "Mikhail Ulyanov", and "Aulis", which were actively operating on Arctic routes in recent months. These tankers feature a special design that allows for the safe transport of oil in icy waters.

Risks to production

Experts note that sanctions could leave millions of barrels of oil without buyers, as storage capacity at Arctic projects is extremely limited. Several weeks of transport disruptions could lead to forced production cuts.

A particular problem is the lack of logistics infrastructure to redirect Arctic oil into Russia's pipeline network. This means that in the absence of exports, oil would have to be stored in floating facilities, significantly increasing costs.

Sanctions exemptions

Notably, production at the Varandey field, operated by Lukoil, has not been subject to sanctions. However, this does not resolve the industry's general problems, as all volumes of Arctic oil are oriented towards export, and there is no domestic market in Russia for these grades of oil.