• 2015 July 18

    Road to exclaves

    Russia desperately needs to establish a regular and stable transport connections with the Kaliningrad region, the Crimea and Sakhalin. For this purpose it is proposed to build new ferries with the transfer of functions of the maritime carrier to BFI LLC (Black Sea Ferry & Investments), a subsidiary of JSC Russian Railways (RZD), working under the terms of charter with its shareholder. This will help form through rates and ensure the profitability of transport, and if necessary to subsidize the transport tariffs.

    A recipe from Russian Railways
    Some experts believe that attracting private commercial entities does not solve the problem of maximum carrying capacity of ferry services to exclaves and island territories of Russia due to significant fluctuations in profitability, following the RUB exchange rates wih a changing commodity market.

    Russian Railways (RZD) has proposed a solution for financing the cost of intermodal junction "railway-ferry" through the mechanism of time-charter, and it is advisable to transfer the competence of an operator of the ferry line to the above mention BFI. The mechanism gives the maritime carrier all the required competencies to maintain the fleet and the level of profitability. In the case of a positive result of this decision, the mechanism of these charters stipulated each time and with expert assessment carrier's cost, may be proposed to any participant who would be willing to transfer his tonnage in management of the maritime carrier of Russian Railways, BFI. The basis for the transfer will be contracts applied in seaborne freight transport (contracts of consecutive sailings, the contract of time / bareboat charter).

    Such an approach, according to its drafters, will allow to consolidate the tonnage in market conditions and to ensure control of Russian Railways for the carrying capacity of the rail lines. An important aspect of this work is to provide BFI with all the required instruments from RZD, namely the formation, implementation and verification of shipping documents, the amount of cargo on routes to ports and railway stations, etc. It provides feedback to the structural units of Russian Railways and shippers for adjustments to forecasts of the situation at the stations, ferry lines related to weather conditions in the lines operations and the ability to correctly draw up expenditures in the budget of a maritime carrier in cooperation with Russian Railways in terms of evaluation of performance. Well-adjusted mechanism of the transfer of railcars and cargo, handling and settlement mechanisms, used by Russian Railways will be an integral part of this type of liner shipping in regulations adopted within the holding.

    An important aspect of the lines will become work with cargoes which is expected to be led by Russian Railways and its subsidiaries, ensuring collection of fees from shippers and work with cargo bases. The above approach to collecting and recording information using a whole range of mechanisms suggests the possibility of considering a through fare from the station of the shipper to the station of the consignee with participation of a ferry line. In this case RZD has the ability to correctly determine indicators of the real cost of shipping depending on the volume of cargo and timely offer of current tariff for transportation.

    In cases where there is an alternative possibility of delivery (like in Kaliningrad region), JSC Russian Railways should have the right for an independent decision about the cargo delivery on one of the existing routes. With this scenario the Russian Federation, in the case of the relevant decision, if necessary, will be able to compensate the cost of transport by Russian Railways. So smooth delivery and carrying capacity of lines become financially secure in any economic scenario, the concept drafters believe. With this approach, the subsidies that can be directed to support the necessary transportation fees, and will be spent exclusively on the support of Russian companies, and not pay for the services of foreign railways that quite often imposing prohibitive rates for freight transport using the situation with goods supply to the exclave.


    Ust-Luga-Baltiysk line
    Building up the necessary tonnage on the ferry line Ust-Luga - Baltiysk requires the construction of a new fleet. It may take at least two years. The cost of building the new ship with capacity of not less than 71 conventional railcars (14.5 meters - the length of a conditional car) with ice class not higher than Arc5 will be about 60 million euro on average if the order is placed with a European shipyards. Service life of such a vessel is estimated at 25 years.

    The vessel must operate on diesel fuel and liquefied natural gas (LNG), which is associated with the mandatory sulfur restriction in the Baltic Sea. Also, the vessel must be equipped with propulsion system that would enable her to sail with cruising speed of at least 21 knots and deployment on the line of at least three such vessels.

    Time for cargo loading on the quays, due to the lack of an elevator on board the ship and rolling on cargoes on her deck, will not exceed three hours. Total number of vessels operating on the existing lines, can thus be increased to six, which fully utilize the capacity of ferry complex in terms of onshore infrastructure. If the project appears successful there will be an opportunity to offer clients two return journeys a week on one vessel (48 return voyages per month by six ferries). This will allow the ferry line operator to transport more than 42,000 railcars (conventional) per year and completely ensure the domestic demand of the Kaliningrad region. To hedge the current foreign policy risks, reduce construction costs and optimize the schedule of order execution it is possible to consider placing ferry orders with South Korean or Chinese shipyards. Preliminary estimates show that the construction of a train ferry in China using Chinese financing package may reach about RUB 2.5 billion at the current rate. In the framework of the agreements signed between China and Russia fixing of prices and payments may be made in rubles. At the same time, an important factor in picking the shipyard becomes the availability of guaranteed upgrade of new type engines what takes places in the shipbuilding industry every five years, as well as the possibility of to engaged in the shipbuilding contract of Russian enterprises.

    Sakhalin-Vanino line
    Regarding the Sakhalin-Vanino ferry line, the federal target program (FTP) "Development of the Far East and Trans-Baikal" envisages the construction of two railcar ferries of new generation to ensure traffic to the Sakhalin region. The Federal Agency of Sea and River Transport (Rosmorrechflot) was appointed as State Customer, the Customer-Developer - the State Customer Directorate for Maritime Transport. Earlier in the framework of the FTP Rosmorrechflot in conjunction with the Directorate carried out work to design a new generation rail ferry for the Vanino-Kholmsk rail ferry line. The same FTP provides for measures for the refitting of rail and ferry systems in the ports of Vanino and Kholmsk. Rosmorport was chosen as Customer-Developer of these facilities.

    In 2014, as part of the design work the Directorate implemented to preliminary assessment of the construction project cost. Given the availability of the design documentation coupled with the advanced financing package the organisation  prepared a highly detailed assesment. A source familiar with the matter told IAA PortNews, United Shipbuilding Corporation (USC) has calculated the cost of construction at RUB 6.5 billion for one ferry, and one of the Turkish shipyards gave the cost at EUR 48 million (about RUB 2.65 billion).

    BFI LLC is set to consider the functions of the operator of projected newbuilds  for train ferry line Vanino-Kholmsk on receipt of the corresponding order of the holding, with the transfer of newbuildings to the ownership of JSC Russian Railways. The sea carrier is ready to participate in the working group on preparation of the technical project and tendering process documentation, conducting negotiations with foreign shipyards, as well as in the construction supervision, with the inclusion in it of representatives of BFI, as the future operator, and those of Rosmorport.

    So, in case of implementation of the above proposals, the ferry lines to the exclave and isolated territories of the country, will become kind of part of the railway infrastructure of Russia.

    Vitaly Chernov.