Possibility to supervise a student abroad?
I was supervised remotely for my Master's dissertation, so yes, this can and does happen in academia. My situation was similar to yours: there was no one working in the field in which I really wanted to specialise at my university.

My supervisor and I communicated via email and had a Skype meeting once a week (this is the closest you can get to an in-person meeting, so I would highly recommend doing it, or at least supplement emails with phone calls). I also visited him in person twice during the project (relatively easy since we were both in the same country, about 5 hours apart by train).

In my case, it was very informally organised; the course coordinator for the dissertation agreed I could have a supervisor from another university and I had a second supervisor at my own institution who I updated regularly on my progress. There was some talk of my having to pay tuition fees to my supervisor's university but in the end this didn't happen.

However, depending on the specific rules and procedures of your or the supervisor's institutions, there may be formal paperwork to submit. There's probably someone you can ask about this, e.g. the department head or administrator.

Good luck!