Talking about the Northern Sea Route without illusions and excessive optimism

The prospects for the development of the Northern Sea Route were assessed without illusions and excessive optimism at a meeting held last week in Murmansk by the head of the Russian Cabinet of Ministers, Mikhail Mishustin. Federal ministers and the heads of Russian regions and major companies, whose business ambitions extend to the Arctic, considered the issues for discussion from the positions defined by the Prime Minister "both to ensure the national security of our country and of course its economic interests."

Where does the LASH carrier go?

The principle that the evolution of the Northern Sea Route should shift from declarations and demonstrations to pragmatic solutions of pressing problems and take into account cost-effectiveness was also proclaimed during the meeting between Vladimir Putin and the head of the Federal Agency of Fisheries, Ilya Shestakov, on October 19.Many observers paid attention to the part of Shestakov's report where he talked about the prospects for transporting Far Eastern seafood to the European part of the country along the Northern Sea Route.

From the restrained words of Ilya Shestakov, it is easy to understand that there is no need to deliver Pacific fish along the NSR this year. The railway is coping with the current volumes. The fish delivered through the Arctic would not have a significant impact on the amount of seafood available in the domestic market.

The LASH carrier "Sevmorput" left the port of Petropavlovsk-Kamchatsky in September with 6.5 thousand tons of frozen fish in 204 containers on board. This volume is equal to the load of a freight train with increased weight capacity. According to its technical specifications, the huge vessel is capable of carrying 1336 20-foot containers. In other words, "Sevmorput" left Petropavlovsk carrying less than a quarter of its capacity. “The Barents Observer”, an independent Norwegian publication, hastened to report this with a touch of gloating, as the fishing voyage seemed more like a publicity stunt than a profitable business to them.

Even though this Norwegian periodical, known for its anti-Russian position, is obliviously biased, one cannot but agree that a fish delivered by a ship that is only one-fourth full, without budget subsidies, would cost so much that it would be unaffordable to Russian consumers and would be not cost-effective for business. Only the ports of delivery and dispatchers would profit from such transport operations.

The experts from the Development Corporation of Kamchatka (the DCK) last year warned about the danger of substituting of an economic expediency by propaganda considerations while the formation of seafood cargoes for shipment by the Northern Sea Route. That said, it was the Corporation that put forward the idea of using the Sevmorput LASH carrier to deliver Far Eastern seafood to the European part of the country on September 18, 2015, at a meeting of the Business Council of State Commission for Arctic Development. The then Deputy Prime Minister of the Russian government Dmitry Rogozin instructed them to organize an experimental voyage, which was carried out only in 2019.

But already in 2015 it was said that this route would only be profitable if the vessel were fully loaded in both directions.

And the first experimental voyage of the LASH carrier raised the question of the expediency of its use on the St. Petersburg - Petropavlovsk-Kamchatsky line. In January 2020, Deputy Head of the Northern Sea Route Directorate – Head of Rosatom's Department for Development of NSR

Maxim Kulinko, noted during a press release: “We are currently trying to make this line [transportation of fish from Kamchatka] work.

In order to do that, we consider the possibility of renting some more container ships. Preliminary calculations demonstrate the efficiency of using two container ships with a capacity of 400 forty-foot refrigerated containers. Unfortunately, transportation from Kamchatka to St. Petersburg extends the route. Therefore, we would like to organize the transshipment of refrigerated cargo in Murmansk. "

But this year, "Sevmorput" appaired in Avacha Bay and left it only one-quarter full and went again to St. Petersburg.

From the words of Ilya Shestakov at a meeting with the president, we can conclude that in the future, the LASH carrier would come to Kamchatka depending on the availability of the corresponding shipments of seafood. And there is one more reason the "Sevmorput" next year, most likely, will not appear off the coast of Kamchatka. "

According to media reports, "Sevmorput" accepted the cargo for the Russian Antarctic station "Vostok" and went to the southern hemisphere in October. After a long voyage from the top of the globe to its bottom and back, the vessel will require extensive repairs.

Russian polar logistics is still focused on hydrocarbons

Among entrepreneurs and the expert community, the need to turn talk about the development of Russian polar logistics from plans and concepts to solving specific problems had become obvious long ago. The meeting in Murmansk means that the message of the business has been attended to.

The reaction to the problem has changed from dreaming to real solutions. It was ensured by two factors. First, it became obvious that the NSR, under current conditions, is indeed capable of taking a significant part of the world's sea transport in the future. And, secondly, it turned out that the domestic oil and gas industry is already interested in the Arctic today as an optimal route for the delivery of hydrocarbons to foreign consumers in Asia and Europe. The profitability of polar logistics is ensured by a separate transport scheme.

It involves the use of an ice class fleet in high latitudes with the subsequent transfer of cargo in hub ports to ships intended for navigation in temperate and tropical waters.

I should remind you that the Development Corporation of Kamchatka was the first to develop such a logistics scheme, explaining the need to build container and hydrocarbon terminals on the eastern coast of the peninsula. And though four years ago the Arctic transport concept proposed by the Corporation had a wide range of critics, today its practical value is considered proven. The fact that it was put into service was also mentioned by the Minister of the Russian Federation for the Development of the Far East and the Arctic, Alexander Kozlov, who took part in that meeting in Murmansk. He noted that "It is stupid to carry cargo to Asia on icebreakers, they should be reloaded."

The Russian structures responsible for the development of the Northern Sea Route do not put on the agenda the reorientation of international container traffic from the south to the north of the Eurasian continent. Vyacheslav Ruksha, Deputy General Director - Director for the Northern Sea Route Directorate of the State Atomic Energy Corporation Rosatom, believes that the NSR will turn into an international transit corridor by 2030.

At a meeting in Murmansk they suggested that the volume of traffic on the northern route, including imported goods and the transit of goods from Europe to Asia, will be about 2.3 million

tons. A significant adjustment to this position is possible only if the global economy grows, which, apparently, is not worth hoping for in the near future.

This year, the tonnage of cargo transportation along the NSR is forecasted to be in the range of 31 to 32 million tons, which is the same volume as the last year. There will be no growth, but in the context of the widespread curtailment of economic programs, a decrease in the volume of world trade, having the same volume of traffic as last year indicates the demand for Arctic logistics and its growing potential.

At the meeting in Murmansk, it was not concealed that in the coming years, the growth of cargo transportation along the NSR will be provided only by the oil and gas industry of Russia. The increase in hydrocarbon exports gives a reason to say that the task set by the head of state to increase the volume of polar sea shipping in 2024 to 80 million tons has a real chance of becoming reality. Alexander Kozlov listed projects that will allow reaching the expected parameters of polar logistics. Among the companies that are able to ensure the loading of the Northern Sea Route, the minister put PJSC Novatek in the first place.

The minister reminded us that this company is building transshipment complexes in Murmansk and Kamchatka. It was announced at the meeting that delays in the implementation of federal programs involving the creation of the necessary infrastructure for LNG transshipment terminals could complicate their commissioning. It involves dredging, navigation equipment, and berthing facilities.

Alexander Kozlov made it clear, “If the relevant facilities are not commissioned in the first quarter of 2022, the timing of the construction of the transshipment complex may be disrupted, and we will let Novatek down.”

The head of the company, Leonid Mikhelson, expressed similar concerns: "It is necessary to establish a contract for dredging work in Bechevinskaya Bay. According to our estimates, it must be done no later than February, so that, as was said, in the first quarter of 2022, these works would be completed."

At the same time, Leonid Mikhelson noted that the construction of the LNG terminal in Bechevinskaya together with the implementation of the main project will solve the problem of gasification of the region.

There is no doubt about the seriousness of the company's intentions or the scale of its plans. The head of Novatek announced at the meeting the order placed at the Zvezda shipyard for the construction of 15 ice-class LNG carriers, which will run along the NSR. Novatek has increased geological exploration work by 5-6 times and is ready to produce up to 70 million tons of LNG per year in a decade.

Transportation logistics are a way to develop Kamchatka

The construction of the terminal in Bechevinskaya Bay will mark the beginning of a large-scale strategic exploitation of the logistical potential of Kamchatka, due to the favorable geographical position of the peninsula and the presence of several deep ice-free bays on its eastern coast.

In addition to PJSC Novatek, there are at least two more companies that have drawn up plans for the construction of terminals in the region, oriented for the transshipment of goods transported along the Northern Sea Route. It is clear that the profitability of such projects will

become possible polar routes are integrated into the international transport system. It will both accelerate and ensure the transition of the NSR to the mode of year-round navigation. It's hard to believe in it yet. After all, 80 - 85 years ago, passage through the Northern Sea Route in one trip was considered a notable achievement.

Today even the extremely pragmatic Mikhelson is sure that all-season sailing in polar waters is feasible. Novatek has already expanded its Arctic navigation to 8 months per year.

“This year from May to June we jointly carried out super-early voyages to China along the Eastern Route. The possibility of safe navigation from May to January has been practically confirmed. The next task is to ensure year-round navigation in the eastern sector of the Arctic,” said Leonid Mikhelson at the Murmansk meeting.

Those words will mark the beginning of active inclusion of Kamchatka as a transshipment base in international logistics. Today, plans for the development of Kamchatka are made up on the basis of three sectors of the economy - the fishery complex, tourism, and the mining sector. But all of them for obvious reasons have certain environmental, demographic, and transportation limits. Integration into international transits logistics will not only form a new economic engine for the evolution of the region, but will also give an additional synergistic impetus to the traditional sectors of the economic life of the peninsula.

At the meeting in Murmansk, another global project, into which Kamchatka may also enter, was discussed.

The Minister of Digital Development, Communications and Mass Media of the Russian Federation Maksut Shadayev spoke about the project announced by a group of investors led by Megafon to build a fiber-optic communication line along the Tokyo-Helsinki route for organizing the transit of Europe-Asia traffic. It is clear that Kamchatka, stretched from north to south, is the most natural route for laying a fiber-optic line connecting the two parts of the world.

But, while the fiber-optic communication line from Tokyo to Helsinki is still just an idea, in the near future the laying of the Petropavlovsk-Kamchatsky - Anadyr fiber-optic communication line will soon begin in the seabed.

Lilia KRAVCHUK, Acting General Director of the Development Corporation of Kamchatka