Arctic key keepers

Shaping of new Arctic management structure has been completed in Russia. Several bodies will be in charge of its development: the Ministry for the Development of the Russian Far East, the Ministry of Transport, Rosatom, State Commission for Arctic Development Issues. They face a challenging task: cargo base of the Northern Sea Route confirmed by today does not exceed 53 million tonnes per year with a target of 80 million tonnes to be achieved by 2024.

Northern hierarchy

The new system of Arctic management has been shaped in general. NSR development will be a direct responsibility of Rosatom Corporation and the Ministry of Transport of the Russian Federation.

When speaking at the 2nd Hydraulic Engineering Structures and Dredging Congress organized by IAA PortNews, Mikhail Belkin, head of the Northern Sea Route Directorate’s Department for Development of NSR and Costal Territories, said that FSUE Hydrographic Company and FSUE Atomflot will be run NSR Directorate headed by Vyacheslav Ruksha.  

Under the authority of Rosatom, the company will be responsible for navigational and hydrographic support (recommendations on the routes, ship positioning system), running and building infrastructure on the Northern Sea Route (sea canals, vessel traffic management systems, hydraulic engineering structures), Mikhail Belkin explained.

Nadezhda Zhikhareva, Deputy Head of Federal Marine and River Transport Agency, who also took part in the Congress, confirmed that the Minister had made a decision on transfer of the authorities to Rosatom. 

Atomflot, in its turn, will ensure information support of Arctic shipping, icebreaker assistance to ships, port and pilotage services, emergency response, operation of nuclear-powered icebreakers and auxiliary ships.

Vessel Traffic Management System (VTMS), Automatic Identification System (AIS) and Pilotage Service on the Northern Sea Route will remain under the jurisdiction of FSUE Rosmorport, Andrey Lavrishchev, General Director of Rosmorport said at the Congress.

The Ministry of Transport will retain its functions concerning the Northern Sea Route: regulation of shipping, compliance with international obligations, federal control of transportation, state port control, safe shipping regulations, guiding Harbour Masters, approving the list of port dues. As agreed upon with Rosatom, the Ministry of Transport will approve compulsory regulations for seaports, rule of icebreaker assistance and pilotage, list of port dues, decisions on opening of seaports etc.

Apart from Rosatom and Transport Ministry, the Arctic issues will be supervised by the Ministry for the Development of the Russian Far East which is to be renamed Ministry for the Development of the Russian Far East and the Arctic. Arctic issues within the Ministry  will be supervised by First Deputy Minister Aleksandr Krutikov.

Besides, Yury Trutnev, Deputy Prime Minister of the Russian Federation - Presidential Plenipotentiary Envoy to the Far Eastern Federal District, was appointed by Prime Minister Dmitry Medvedev as the head of the revised State Commission for Arctic Development Issues. “To ensure maximum effect from the Arctic zone development our plans should be correlated with the general plans of the state and, of course, with business plans and regional plans. To continue work towards this in the future I made a decision to revise the composition of the State Commission for Arctic Development Issues and signed a corresponding order. The Commission will be more compact. At the same time, it should be functional, of course, and hardworking taking into consideration the scale of tasks. I have signed the order. The Commission will be headed by Yury Trutnev”, said the Prime Minister commenting on the appointment.

Yury Trutnev has recently said that a preferential system should be created in the Arctic. According to him, that would be a new scheme, different from that created for the Far East and offered within the Free Port of Vladivostok and Priority Development Areas. Specific parameters of those preferences has not been announced yet.

Thus, the Arctic management system features the following configuration: Rosatom is in charge of specific transport issues and operational management of the Northern Sea Rout; the Ministry of Transport will continue developing and improving the regulatory framework related to transportation in the Arctic, exercise transport control and supervision; the Ministry for the Development of the Russian Far East will be responsible for the development of the Arctic territories. The entire system is subordinate to the State Commission for Arctic Development Issues coordinating and guiding all the stakeholders.

The task of the Arctic ‘key keepers’ is quite challenging: they are to ensure the growth of annual cargo traffic on the Northern Sea Route to 80 million tonnes by the end of 2024. As Mikhail Belkin told IAA PortNews, implementation of confirmed projects (Yamal-LNG, Arctic LNG 2, Nornickel and transit projects) will only ensure 53 million tonnes of annual turnover. Therefore, implementation of additional projects is needed. Today, among them is the project on construction of coal terminal “Chaika” and the Payakskoye field development (“Bukhta Sever” terminal). Although, there are certain problems with these projects, they are viable, believes Mikhail Belkin.

Yury Trutnev earlier told journalists that he considers the target of 80-million tonne cargo traffic on the Northern Sea Route by 2024 to be achievable. In the opinion of Yury Trutnev, licenses for extraction of mineral resources should be withdrawn from companies failing to meet the requirements and granted to other companies.

Non-hothouse conditions

The Northern Sea Route development is a challenging task given the forecasts of the Russian scientists according to which we should not rely on global warming in the Arctic. As Aleksey Sokov, Acting Director of P.P.Shirshov Institute of Oceanology of the Russian Academy of Sciences (IO RAS), told in his interview with IAA PortNews, statements about long period of warming in the Arctic are just speculations >>>>

In this respect, the programme on construction of new powerful icebreakers and ice class ships is inescapable. The demand for vessels to be deployed for cargo transportation on the Northern Sea Route (excluding icebreakers) is estimated at 74-76 units by 2024. This forecast was made at the meeting on NSR traffic development held by Federal Marine and River Transport Agency (Rosmorrechflot) and attended by representative of the Ministry of Industry and Trade, Ministry of Economic Development, Ministry of Energy.

As of today, 33 vessels have been chartered for the Northern Sea Route under long-term agreements with 14 vessels in operation: nine Arc7 gas carriers, one conventional gas carrier and four ice class tugboats. 

In 2019, the fleet of vessels operating on the Northern Sea Route will be expanded with six Arc7 gas carriers, seven conventional gas carriers, two Arc7 carrier of gas condensate and one port icebreaker of 12 MW. Three more conventional gas carriers are to be put in operation in 2020. All the abovementioned ships will be involved in transportation of NOVATEK’s cargo.

Apart from ships for NOVATEK, the meeting participants were provided with calculations on possible demand for vessels from a number of companies intended to work in the Arctic: 11 bulk cargo carriers for VostokCoal LLC; up to 10 Arc7 tankers, a conventional 150,000 DWT tanker and up to 4 port fleet ships for Neftegazholding JSC; 7 Arc7 vessels and 3 Arc5 vessels for Gazpromneft-Yamal LLC; 15 bulc cargo carriers for UK Utrennaya Zvezda LLC and up to 4 Arc5-Arc8 bulk cargo carriers for GDK Baimskaya LLC.

Besides, the meeting noted the need for new rescue and survey ships designed for Arctic operations.

That brings up another challenge: how can this ambitious shipbuilding programme ensure a synergetic effect for the Russian industry? 

According to the Russian legislation, an exclusive right is granted to vessels sailing under the State Flag of the Russian Federation to transport by sea oil, natural gas, gas condensate and coal produced in the Russian Federation or in an area which is under the jurisdiction of the Russian Federation and loaded onto vessels located in the Northern Sea Route area. At the same time, the Government is entitled to allow transportation of the above-mentioned cargo by foreign-flagged ships.

In February 2019, Yury Trutnev expressed his support to the decision on allowing NOVATEK deploy foreign vessels for coastal shipping till the company takes the delivery of ships built by Russian shipyards.  

When speaking at the 2nd Hydraulic Engineering Structures and Dredging Congress, Nikolay Shablikov, Deputy Head of the Department of Shipbuilding & Marine Engineering, RF Ministry of Industry and Trade,  said that the Ministry is currently developing amendments into the Order of RF Government No 719 “On confirming Russian origin of industrial goods” and a supplement document, “Specifications of industrial products to be rated as goods manufactured in the Russian Federation” in order to develop criteria to confirm the Russian origin of ships. Besides, the Ministry is looking into providing subsidies to Zvezda Shipbuilding Complex in the Primorsky Territory which is supposed to build a significant number of Arctic ships. Besides, a package of state support measures is being applied in Russia in the segment of shipbuilding. It includes subsidies to cover loan and leasing interest rates as well as ship utilization grants.

In conclusion, it can be said that preliminary work on defining “who is in command” in the Arctic has been completed in general. Now, hard work is to be done to develop a system of incentives for investments into the Arctic, training of personnel, construction of Arctic class ships, development of the northern infrastructure. The success of this work can be evaluated before a six-year period is over.

Vitaly Chernov