Click to enlarge The Northeast Passage above Arctic Russia has long been touted as the most likely viable trade route through the Arctic as the Arctic shipping season in the region lengthens. But as Dr. Bjørn Gunnarsson writes, developing the route requires a lot of investment which Russia likely cannot afford alone.
Dr. Bjørn Gunnarsson is Managing Director, Centre for High North Logistics Nord University Business School In Norway. This article originally appeared in The Circle 03.16. See all issues here.
In 2015 a total of 5.4 million tons of goods and project cargo was transported on the Northern Sea Route (NSR), up from about 4.0 million tons in 2014 and 3.9 million tons in 2013. Only a small fraction was transit cargo between two ports lying outside the Russian official boundaries of the NSR. NSR cargo flow is expected to increase considerably with further development of Russian Arctic hydrocarbon projects. Year-round export of LNG from the Sabetta Port should reach 17.6 million tons per year starting with the year 2021; crude oil from the Novoport Oil Field 8.5 million tons per year by 2017 (through loading terminal off Cape Kamenny); and crude oil from the Payakha Oil Field 7.3 million tons per year by 2024; according to information from Rosatomflot.
This is in addition to year-round transport of 1.3 million tons per year of nickel and other nonferrous metals from Norilsk Nickel at the Dudinka Port on the Yenisei River. Other projects in the planning states are Novatek’s Arctic LNG-2 on Yamal and Gydan with estimated 16.5 million tons of LNG produced per year; transport of 5-10 million tons of coal from the Taymyr Peninsula from the port of Dikson as part of the VOSTOK coal Project; and 45 million tons per year of crude oil as part of the Transneft-Arctic Project with development of an offshore loading terminal for crude oil in the Sabetta Port.
If all these energy projects come through then transport volumes on the NSR could reach 100 million tons per year by 2030. Most of this cargo will be transported on the NSR westwards from the Yamal, Gydan and Taymyr Peninsulas to European markets and onwards through the Suez Canal to Asia. Part of the cargo will be transported eastwards on the NSR to Asian markets, but likely mainly during the five to six months of the summer-fall navigational season when sea-ice conditions are most favorable.
The large Russian rivers which all flow north into the Arctic Ocean can also act as major transport connections from the internal part of Russia to the NSR, but also the other way around as Russian rivers such as Ob, Yenisei and Lena Rivers offer logistical possibilities for transportation of goods and project cargo from the NSR into the inner parts of Russia promoting further industrial development.
In short, NSR is the ideal throughway for Russian Arctic resources and industrial products westwards to European markets and eastward to markets in NE Asian, and for promoting regional industrial development.
But what are long-term prospects for the NSR to develop not only into Russian-Asia and Russia-Europe maritime trade routes but into an international trade route between markets in the North-Atlantic and the North-Pacific?
A total of about 120 full transit voyages took place from 2010-2013 with icestrengthened cargo vessels transporting different types of cargo at different times during the summer-autumn navigational season and encountering different seaice conditions and other weather-related operational conditions. These demonstration voyages showed that NSR can be relatively safe and reliable with escort and guidance from the Russian icebreaking fleet and use of Russian ice pilots (navigators). But to be of interest for commercial shipping, the NSR needs to provide not only needed safety but also predictability and punctuality of cargo transport. Regularity of year-round supply of goods is no less important than the cost of transportation. The current limited seasonal window for trans-Arctic voyages of five months (July-November) will be a limitation to the NSR’s full development and economic viability. To make the NSR safer and more reliable as a transport route both for Arctic resources as well as more attractive as an alternative trade route between markets in NW Europe and NE Asia, a number of important changes need to take place.
This includes strengthening NSR’s overall administration and management, transport services, and last but not least maritime infrastructure.
Today in Russia there is no single organization that oversees all NSR activities. Such an organization should determine tariff rates, predict future NSR traffic, cargo volumes, and demand for icebreaker assistance and other support services.
The NSR management also needs to find ways to reduce risks of shipping delays due to sea-ice by improving sea-ice predictions and ice reconnaissance. The tariff system needs to be user friendly and fees competitive and similar to canal fees on southerly routes (Suez/Panama). Icebreakers and ice pilot services are key elements of the NSR’s support services. Sufficient icebreaking capacity needs to be available to assist vessels in transits and to keep the route open. The problem is that Russian icebreakers have since 2014 been primarily engaged in Arctic oil and gas projects and this will likely continue to be the case over the next several years.
We need a detailed study that shows the structural and design characteristics of a new NSR transport and logistics system – a system that we would like to see put in place in the near future, for example by 2040 or 2050, to satisfy our safety, reliability and environmental requirements. All stakeholders need a clearer picture of how various components of the logistics chain are tied together and how the whole logistics system should operate and function.
Full-scale, year-round transit shipping on the NSR requires different physical infrastructure and support services than the current seasonal operation during the five months of summer and early fall which is taking place in largely ice-free waters. The build-up of new infrastructure will take many years and will be costly. Infrastructure build-up is also needed along the whole length of the North East Passage not just the Russiandefined borders of the NSR. Without cost-sharing the up-front capital costs of establishing proper maritime infrastructure are prohibitive and too high for Russia to take on alone. If an agreement is reached on the design of a new NSR’s maritime transportation and logistics system then the next step is establishing international cooperation and partnerships for putting the required infrastructure in place. Russia has already stated that ideal partners would be countries in NE Asia that see benefit in greater access to Russian Arctic resources and a shorter trade route to to NW Europe (China, South-Korea and Japan).
This piece is adapted from an article previously published in The Maritime Executive with the permission of the author.