Russian tanker owner Murmansk Shipping Company (MSCo) is scrapping its arctic oil terminal at Varandey after losing out on a Lukoil contract to Sovcomflot.

All shipping operations have now ceased at the Barents Sea facility, potentially weakening the company's position in the region.

The facility was opened with Lukoil in 2000. Built three kilometres from shore, it has an annual capacity of 1m tonnes. It will now be closed and dismantled, Seanews reports.

Lukoil subsidiary Naryanmarneftegaz is opening a new terminal in the area, 22km out to sea, with annual capacity of 12m tonnes.

Shipping operations to and from the new outlet will be conducted by Sovcomflot.

A large part of the oil from Varandey will be shipped through the Belokamenka floating oil terminal in Kola Bay operated by Rosneft.

The move is another blow to MSCo, which has also this year lost the contract to manage Russia’s fleet of nuclear-powered icebreakers.