Polar Notes

Jun 2018

India tapping the Russian Arctic

Earlier this month, two ice-class tankers carrying liquified natural gas (LNG) from the Yamal Peninsula in the Russian Arctic arrived in China. The Vladimir Rusanov and the Eduard Toll are the first ships to carry LNG shipments along the Northern Sea Route without icebreaker escort. The voyages herald the start of regular LNG shipments along the Northern Sea Route in summertime. China meanwhile is reaping returns on the $12 billion in loans that state-backed firms have provided to the Yamal LNG project.  

However, too much focus on China detracts from the emergence of another major customer for Russian Arctic LNG – India – which received its first LNG shipment from the Yamal project in March, supplied by Novatek, Russia’s biggest independent energy company. In June, India received another shipment, this time supplied by the Russian state-owned gas giant Gazprom. That shipment marked the beginning of a twenty-year deal for Gazprom to supply India with an estimated $25 billion-worth of LNG from the Yamal Project.  

The tie-up with Gazprom means that the Russian Arctic is now India’s cheapest source of LNG, under-cutting Qatar, Australia and the United States. India is already dependent on imports to meet 45% of its gas needs but this figure is expected to grow as New Delhi seeks to grow the share of gas in India’s energy mix from 6.2% to 15% in coming years.  

India’s emergence as a major customer for Arctic resources follows a decade of growing interest and activity in the region. India, which has long had a presence in Antarctica, embarked upon its first Arctic science programme in 2007 as part of the International Polar Year. That led to the establishment of a $3 million permanent Arctic science station (‘Himadri’) in Ny-Alesund, Svalbard, alongside those of ten other nations including the UK. India has invested more than $12 million in Arctic science in the years since, focussing particularly on climate change and the implications of Arctic environmental change for India’s monsoon season, glaciers and ecosystems. In 2013, India was among the tranche of countries – including several regional rivals – accepted as observers to the Arctic Council. In 2018, India’s National Centre for Antarctic and Ocean Research was renamed the National Centre for Polar and Ocean Research.    

Indian companies have also been on the march, with an eye towards Russian’s vast Arctic oil and gas resources (estimated to be in the region of approximately 48 billion barrels of oil and 43 trillion cubic meters of natural gas). Western sanctions imposed on Russia for its annexation of Crimea forced Russian firms to pivot towards Asian markets to secure finance for Arctic oil and gas projects. India was well-placed to benefit as Indian companies had been operating in sub-Arctic Sakhalin since 2002 where they gained crucial experience of operating in extreme cold and icy conditions.  

Russia first proposed a partnership between India and Russia to explore for hydrocarbons in the Arctic in 2014, however, a formal agreement to expand cooperation in Arctic was not signed until 2016. That came after the purchase of two sizeable stakes in Siberian oil fields by a consortium of Indian companies. The Kremlin also invited Indian companies to participate in joint projects to develop the Russian Arctic shelf. The two countries are now exploring the possibility of constructing a $25 billion pipeline to ferry natural gas from Siberia to India.

India’s investments in the Arctic may not be as geographically extensive as China’s, but the strides that Indian companies have taken with the backing of New Delhi over the past few years are a clear signal that India’s role in the region is becoming increasingly significant. Alongside investments in the Russian Arctic, earlier this year Prime Minister Modi visited Stockholm for the first ever India-Nordic Summit to explore areas for practical cooperation, including in the Arctic. India also signed a joint statement with Canada to promote Indian participation in Canadian Arctic research. Although New Delhi is yet to publish a white paper on the Arctic as other non-Arctic countries have done, these meetings suggest that India is making a concerted effort to widen its involvement with Arctic states to meet both commercial and scientific objectives.