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One of Asia’s biggest security headaches since the end of World War II has been a potential choke point on crude oil shipments that sail through the Strait of Malacca.
China receives more than half its oil imports via the strait from the Middle East. Japan gets 90%; South Korea about 80%. A hostile navy could block the narrow waterway between Malaysia and Indonesia, paralyzing a foe’s economy.
The 890 km strait that divides Indonesia and Malaysia is only 2.7 km wide (1.7 miles) at its narrowest near Singapore, forming a natural bottleneck. It is the second-largest oil trade choke point in the world after the Strait of Hormuz.
However, some analysts say this long-standing security threat to Asia may moderate as the melting ice in Russia’s Northern Sea Route and North America’s Northwest Passage offers a shorter and less costly way to ship oil to Asia from Russia, Norway, Greenland and Canada. Global warming also makes it easier to ship oil from Alaska to China.
“The Arctic route reduces the risk of oil disruption for China, Japan and South Korea. You can bring it all through the Northern Sea Route, bypassing the Malacca Strait and its security problem,” Arctic expert Rockford Weitz told Asia Times. Weitz is a professor of practice who directs the maritime studies program at Tufts University’s Fletcher School in Medford, Massachusetts.
The Northern Sea Route runs along the Russian Arctic coast from the Kara Sea, along Siberia, to the Bering Sea.
The shift will occur gradually over the next 10-15 years, according to Weitz, with increasing amounts of Arctic oil and gas reaching China and other Asia nations via the polar route. Another choke point could form at the Bering Strait between Russia and Alaska. But in this case, Washington would risk angering Moscow if it tried to interfere with navigation.
Does the Arctic have more oil?
Scientists say the Arctic holds the world’s largest remaining untapped gas reserves and its last undeveloped oil reserves. The US Geological Survey estimates the Arctic holds up to 90 billion barrels of untapped oil. They also reckon the region holds as much as 1.7 trillion cubic feet of natural gas and 44 billion barrels of liquid natural gas.
But Weitz notes the energy reserves, especially in areas like Greenland, could exceed existing estimates. If true, this means the Arctic might start to overtake the Malacca Strait-reliant Middle East as a leading supplier of crude to Asia.
“The oil is there, it’s just a question of how much,” Weitz said, noting that the Arctic is still relatively unexplored and that test drilling in Greenland’s fast-retreating ice cap and other northern sites is still being carried out.
He sees a growing number of joint oil exploration and development projects between Moscow and Beijing, especially as global oil prices head higher and justify the costs of these ventures. One focus of these efforts, according to Weitz, will be the Siberian Plateau which is known to hold significant amounts of oil.
Russia calculates that the Arctic territory it claims may hold up to 586 billion barrels of oil, though this is unproven.
Shorter than Suez
The capacity to ship oil and gas from ports along the Northern Sea Route also reduces the need to build costly pipelines across the tundra for land-based energy transport. The fact that rivers in Russian Siberia flow north to the Arctic Ocean also allows these waterways to be used to ship oil and other resources to coastal ports.
Analysts say there will be a 40% reduction in sailing distance, and a 20% cut in fuel, if the Northern Sea Route is used to connect Northern Europe with China, Taiwan, South Korea and Japan versus the Suez Canal route via the Middle East. There are smaller but comparable cuts in distance and fuel versus the Persian Gulf.
Data from Russia’s Arctic and Antarctic Research Institute shows the country’s entire Northern Sea Route was virtually ice-free between June and September of 2017. Analysts say this suggests the transit will be increasingly easy to navigate for bulk carriers – even during winter months when ice levels are highest.
“Ice-class” oil tankers with strengthened hulls that can negotiate Arctic waters are already being built. Weitz says more advanced bulk carriers of this type will be needed, along with new ice-breaking vessels.
China’s state oil firms and banks have underscored their interest in Russia’s Arctic energy assets and the new shipping route by investing in the huge US$27 billion Yamal LNG facility in Siberia. Asian buyers account for 54% of Yamal’s contracted output. More Chinese cash is flowing into a newer Arctic LNG2 project that may be bigger than Yamal.
A Chinese state policy paper issued in late January further confirms Beijing’s interest in tapping Arctic oil and gas.
Risk of major oil spills
However, one dark cloud hovering over the new route is the possibility of a catastrophic oil spill. Arctic countries have limited search-and-rescue capability and fewer resources to cope with an oil spill from a big tanker in such remote and inhospitable waters.
“The biggest barrier to oil production in the Arctic is the threat of a spill. Any clean up would be far worse than Deepwater Horizon,” Weitz warned, alluding to British Petroleum’s disastrous 2010 oil spill in the Gulf of Mexico which spewed more than 130 million gallons of oil and inflicted over US$17 billion in environmental damage.
The potential fallout from a similar mishap in the Arctic is enormous since today’s supertankers are much larger than the Exxon Valdez, the oil tanker that caused history’s worst Arctic oil spill in Alaska in 1989.
Arctic oil drilling is another possible source of spills. The US Geological Survey reports that 84% of the Arctic’s undiscovered oil and gas lies offshore. Activists like Greenpeace allege that there are ongoing spills from Russian oil companies in the Arctic that have never been reported.
The Arctic Council, the inter-governmental body that oversees the Arctic and its eight member states signed a legally binding agreement on cooperating and responding to a major Arctic oil spill in 2013.
But critics say such cooperative steps are only a start and that further action is necessary, given the lack of infrastructure, knowledge and preparedness to deal with a major Arctic oil spill.
Source: Checkpoint Asia