• 2012 December 15

    Phantoms of Russian infrastructure

    Over the last few years, there have been quite a few ambitious transport projects announced in Russia. Yet some of the projects still have uncertain outlook, namely the deepwater ports projects in Kaliningrad and Arkhangelsk, Murmansk Transportation Node, UP-UP, Northern Latitudinal Route and Belkomur.

    Kaliningrad and Arkhangelsk projects pending

    The Kaliningrad deepwater port project has long been a hot topic. The idea was to create in the Russia’s region a port that could compete with the Gdansk-Gdynia and Klaipeda, accommodating large ocean-going container ships. There were several sites allocated for the construction, and the most likely - Baltiysk and Balga peninsula.

    The Ministry of Transportation has made not a few statements about the project outlook. But experts were doubtful about the project feasibility. Finally, in December 2012, the Russian government has acknowledged in its decree that the project "Construction of a deep-water port in Baltiysk (Primorskaya Bay), the Kaliningrad region" (in the former parameters) as inappropriate. In this regard, the document reads, the parameters of the project have been specified (its funding through federal and extra-budgetary sources was cut down). The released funds have been redirected to the construction of the infrastructure in the framework of the outer harbor Bronka project in St. Petersburg.
    In November 2012, Deputy Minister of Transportation Sergey Aristov said that actually the ministry does not cancel the Kaliningrad deepwater project. The official said that "the project is quite interesting" and the ministry continues its development.

    Thus, we can hear some day about the project again, but with amended parameters, and possibly on other territory.

    Speaking about Arkhangelsk deepwater port project, in October 2012, the head of the transportation agency of Arkhangelsk Territory Administration Dmitry Deart speaking at the 3rd International Conference on Development of Ports and Shipping "Transtec" told about “an investor” (who was not disclosed) willing to participate in the first phase of the project (total private investments are estimated at RUB 35bn).  The official that the investor would be willing to fund the entire project. Earlier, Summa Group had announced its interest in the project.

    The port was planned to be built 55 km north of the main port area, which would require access railroad. The port will be able to accommodate vessels with maximum draft of 11 m (today Arkhangelsk port can handle only 9m-draft ships). The projected throughput of the port will be 28 million tons: 3.5 million tons of them account for coal, 17.5 million tons – for containerized cargo, 2.5 million tons – liquid bulk. Estimated payback time - 8 years.

    The regional administration told PortNews that there are two management companies willing to participate in the port construction. The regional Ministry of Economic Development in conjunction with the Transportation Agency will select the management company and is preparing a decision on the matter. The companies are not disclosed. The port project is considered in conjunction with Belkomur project.
    In November, Sergey Aristov said that no concrete decisions on project have been approved as yet.

    Railways projects for investors

    Continuing the theme of Arkhangelsk, it’s also worth mentioning one of the main Russian transportation protracted project - the "Belkomur" (the White Sea - Komi - Ural main line), which is vital for the development of stevedoring activities in Arkhangelsk.

    The White Sea - Komi - Ural main line should connect Russia’s Permsky Territory and the Republic of Komi with Arkhangelsk to provide the shortest access to sea for delivery of commodities from these regions.

    As Dmitry Deart said the active phase of the Belkomur project began in 2012. “The main line will reduce the time of cargo delivery, boost cargo traffic, will contribute to enhancing the use of the Northern Sea Route, will be a new impetus to the development of the ports of Arkhangelsk and Murmansk," the regional administration press service quoted Dmitry Deart as saying.

    According to him, the feasibility study of the Belkomur project will be presented to the Ministry of Transportation by the end of 2012 for consideration and approval by the Russian government.

    It is planned that the construction of the railway will be implemented on the basis of public-private partnership scheme. According to experts, works can begin in 2014. In this case, the line may be completed as early as 2018.

    “The projects to build a deepwater area of the Port of Arkhangelsk and Belkomur line will enable us to reduce the cost of sea and rail transportation, to open the way for the export and import of products of the Northern Urals, Western Siberia and Kazakhstan," Dmitry Deart said commenting on the project.

    In November 2011, the head of the Republic of Komi Vyacheslav Gaiser said that a concession tender was to be held in 2012.

    "Once we have received the Russian government’s approval and won the support of the then Prime Minister Vladimir Putin, a lot has been done. We have completed preliminary financial and economic calculations and proposed to consider a new concept of the project on a public-private partnership concession model," said the regional head.

    Actually, it would not be wise to trust the very terms that are announced by representatives of the regions - funds for the project will go as expected from private investors and the federal budget. Respectively, the fate of Belkomur project will not be decided by the regional governments, but in the offices of private companies and by federal officials, who have not yet mentioned any specific terms.

    Another railway project associated with the North is the so-called “Northern Latitudinal Route”, which is to be constructed in the framework of the "Ural Industrial - Ural Polar" project. The project is implemented by OJSC Development Corporation. The construction of the bridge over the river of Nadym in September 2011, first object of the project kicked off its implementation by the company.

    The 707-km-long railroad will connect the Northern Railway with the Sverdlovsk rail junction and provide access to the Northern Sea Route through the port of Sabetta. The Sabetta construction began in July 2012. The road will provide the shortest possible transit of petroleum products to the west and cargoes necessary for the development of gas condensate and oil fields, to the east. The project was unveiled at the "Transport Week-2012", held in December 2012.

    In November 2012, Sergey Aristov told journalists that the NLR project has to undergo its feasibility study and therefore was not included in the federal program. At the same time, Aristov assured that in general the the "Ural Industrial - Ural Polar" project will "definitely" be implemented.

    MTN project loses its management company

    The Russian government decided not to create a management company to implement the "Murmansk Transportation Node" project. The government of the Murmansk region in late November 2012 said the management company issue "is not urgent any more."

    The State Customer of the Murmansk transportation node project is RosTransModernizatsiya. Currently, the "Integrated Development of the Murmansk Transportation Node" project is underway: the phase of design and survey of the railway and maritime infrastructure facilities is nearing completion. That infrastructure will include the construction of a general use railway line, a support fleet base on the West coast of the Kola Bay and dredging of the water area of the port of Murmansk.

    The project is funded through the federal budget in the framework of target program "Development of Transport System of Russia (2010 - 2015)."

    The decision of the Russian Government regarding the Management Company of the Murmansk Transportation Node project will not affect anyhow the project to build Lavna Coal Terminal on the western shore of the Kola Bay, said a spokesperson for Lavna Sea Trade Port, which implements the coal terminal project. Lavna Sea Trade Port’s Anatoly Ivanov told PortNews on the sidelines of the conference "Outlook of seamless logistics of Russian coal exports" that the company, which has obtained all approvals and permits, is set to commence the construction of the port facilities and designing of the non-public railroad. So far, the Lavna Coal Terminal is the only real project in the region, though initially the MTN project provided for construction of terminals for handling containers and other goods.

    However, the project is delayed due to the locals’ protests opposing the railroad construction in the vicinity of the village. If the company resolves the conflict the construction of the railway branch will start in the first half of 2013. "This issue must be addressed in order not to slow down the implementation of the project and at the same time to take into account all the needs of people," the Murmansk Government press service quoted Murmansk region Governor Marina Kovtun as saying.

    Previously, Rosmorport had prepared the port infrastructure development strategy until to 2030. This program is intended to be the basis for the government’s decisions whether to support any project that is associated with port activities. In the near future the Russian government is going to approve the country’s transport development program for the period up to 2020. However, there might be some amendments to the program depending on major innovative projects, Deputy Prime Minister Arkady Dvorkovich said speaking at "Transport Week-2012." In addition, the government recently has approved in general the investment program of OAO Russian Railways. Hopefully, these steps will help prevent protracted construction and "phantom" projects with uncertain outlook.

    Vitaly Chernov