• 2014 March 11

    Russia’s Black Sea race

    If the Crimea joins Russia the latter can obtain the control over large offshore fields in the Black Sea. In case of the control over the rest Black Sea coast of Ukraine, Russia will get deepwater ports with the operating terminals allowing it master a considerable part of the Black Sea logistics.

    Crimean blitzkrieg


    It should be noted that this article is not a judgment of reasonability of Russian control over Ukrainian ports and territories, it is just an analyses of possible consequences in terms of the development of seaborne transport and stevedoring activities.

    The Crimean Parliament has taken a decision to join Russia. It means that Russia will obtain the guarantees for the location of its fleet in Sevastopol and will also control other Crimean ports (Kerch, Sevastopol, Yevpatoria, Pheodosia and Yalta). However, those ports do not play any significant role in cargo transshipment so far. They cater for the Crimea itself. On the other hand, Yalta and Pheodosia have a huge cruise potential. In this context we remind that pro-Russian authorities of the Crimea have recently established Commercial Seaport of Sevastopol. 

    Everything is clear here from the military point of view. Despite the Black Sea base being built in Novorossiysk, the location of Black Sea Fleet in Sevastopol is much more advantageous both geographically and economically (Novorossiysk is a well-developed cargo port with a lack of space). The bridge over the Kerch Strait (the construction of which was covered earlier >>>>) will provide additional access to the port infrastructure of the Crimea. 

    Meanwhile, there are plans to build a deepwater port in the Crimea with Chinese companies as investors. As China supports Russia’s position in the situation with Ukraine we suppose that these plans are to be fulfilled at least partially. However, they are unpopular with the local residents as we wrote before >>>> .

    Besides, if the Crimea joins Russia the latter will be able to lay claim to the offshore fields. Earlier, LUKOIL applied for the development of the Skifska gas field (to the south-east of the Crimea) but the Government of Ukraine has given the right to the consortium lead by Exxon Mobil. Besides, the following fields are located near the Crimea: Subbotinskoye and Semenovskoye oil fields as well as Severo-Bulganakskoye, Vostochno-Kazantipskoye and Strelkovskoye gas fields. In theory, especially in case of Russia getting other territories of Ukraine’s Black Sea coast, Russia will be also able to control other fields like Odesskoye and Bezymyannoye gas fields, Shtormovoye and Golitsynskoye gas condensate fields, Arkhangelskoye gas field.

    Odesskoye, Bezymyannoye and Subbotinskoye fields are one of the largest fields in the Black Sea. Recoverable reserves of Odesskoye and Bezymyannoye fields are estimated at over 35 bln cmb.

    South-east interests


    According to RF Transport Ministry, Russia needs dedicated deepwater terminals while there are no deepwater ports in the Crimea. However, the port of Ilyichevsk can handle vessels with the permissible draft of 14 m, Odessa – up to 12.5 m, Yuzhny – up to 14.5 m. The above ports account for some 60% of Ukraine ports’ cargo turnover.

    The terminals of the above ports specialize in handling high paying cargo like containers and hold the leading positions in the Black Sea region. According to Informall, HPC (Odessa) is the second terminal in terms of container turnover in the Black Sea, Container Terminal Ilyichevsk is the 6th

    Russian companies have already expressed their interest in those ports. For example, the shareholder of Container Terminal Ilyichevsk was National Container Company (NCC entered Global Ports Group having an option for 50% of this terminal). According to Global Ports, Ukraine’s container market has a considerable potential. The Terminal has signed an agreement of cooperation with Sea Port of Illichivsk. According to the development programme of the Terminal, its capacity is to reach 4 mln TEUs per year with investments valued at $500. In 2007, the first phase of the project was put into operation and the annual capacity of the container terminal hit 850,000 TEUs. The new complex can handle vessels with the capacity of up to 8,000 TEUs.

    According to earlier statements, implementation of all the above investment projects amid favorable situation in the sea shipping market may attract some $7.4 bln investments and generate up to 11,000 jobs at the three largest ports of Ukraine. If Odessa seaport implements its development programme, the port’s container capacity is to grown by 2 TEUs per year.

    The project of dredging works is ready for the approach canal and the water area of port Ilyichevsk. There is a plan to in crease the port’s container throughput and to build a terminal with the capacity of 1.5 mln ТЕUs.

    The above ports also plan the construction of other terminals dedicated for transshipment of other cargoes.

    Read more about those plans >>>> .

    The group of other Ukrainian ports (Nikolayev, Kherson and Oktyabrsk) is also interesting as they have specialized terminals for transshipment of dry bulk and general cargoes.

    Of course, today it is difficult to estimate the consequences of Russian control over all those ports as the situation in Ukraine is more than uncertain. However, this would certainly considerably reinforce Russia’s position in the stevedoring market of the Black Sea as it would get the access to the entire northern part of the Black Sea coast including the control over offshore fields, not to mention the geopolitical factors. As of today, the infrastructure of the Black Sea Basin of Russia is quite limited: the potential of port Novorossiysk is almost exhausted, deepwater terminals are in demand while the dry cargo district of port Taman is to be completed only in 2020. These conclusions should not be interpreted as calls on any political decisions.

    Vitaly Chernov