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2021 September 9

Near-term prospects of the Far East

Photo by IAA PortNews

The Far East development is associated with exports to the booming economies of the Asia-Pacific Region and with transit. Meanwhile, a lot is to be done to ensure sustainable logistics: construction of icebreakers and ships of other types, modernization of sea terminals, expansion of the railway capacity.

The Far East is getting increasingly significant for international transport flows. Located near the rabidly developing APR countries, the Far East is an entry/exit point for transport corridors crossing Russia.

Shipping of cargo along the Great Northern Sea Route (between Murmansk and Vladivostok) will contribute to the development of transport and logistics infrastructure in the Far East. Annual cargo traffic on the Great Northern Sea Route will reach 250 million tonnes after 2035, Alexey Likhachev, Director General of Rosatom, said at the Eastern Economic Forum.

“Preliminary estimations say we can double cargo traffic on the Northern Sea Route on the horizon before 2030 with the cargo flow along the Great Northern Sea Route to reach 250 million tonnes after 2035”, said the head of Rosatom.

As ROSATOM’s special representative for Arctic development Vladimir Panov said in his turn, cargo traffic on the Great Northern Sea Route in 2030 will total 150 million tonnes including 30 million tonnes of transit cargo.

Fleet

To achieve those ambitious results, it is crucial to ensure year-round navigation, particularly through construction of new icebreakers including more ships of LK-60 series, Leader-class icebreakers of 120 MW and mid-size icebreakers of up to 40 MW for operation in river mouths and in light ice areas. Norilsk Nickel, State Corporation ROSATOM and Far East Shipbuilding and Repair Center are going to sign an agreement on construction of a lead dual-fuel icebreaker by 2026. Vyacheslav Ruksha, Director of the Northern Sea Route Directorate, said on the sidelines of Eastern Economic Forum when answering the question of IAA PortNews correspondent. According to Vyacheslav Ruksha, 3 or 4 dual-fuel icebreakers can be required. Dual-fuel solution will help meet environmental standards.

Image source: Sovcomflot

Environmental sustainability has been recently dominating on the agenda. In respect of it, Russia is planning the construction of ships running on methanol. At EEF, VEB.RF,  VTB Bank, ESN Limited Liability Company (ESN Group), Ministry of the Russian Federation  for Development of the Far East and the Arctic Regions, Marubeni Corporation and Mitsui O.S.K. Lines, Ltd. signed a memorandum of understanding (MoU) for a joint study to build, operate, and  utilize a methanol carrier equipped with a dual-fuel engine (methanol/very-low sulfur fuel oil). ESN Group’s methanol project located in Skovorodino is close to NSR, hence its opportunity to become the key supplier of methanol to ships sailing between Asia and Europe across the Arctic Ocean while gas processing projects financed by VEB RF will let increase methanol production over 1.5 times by 2030.

When speaking about transport ships operating in the Arctic, Igor Tonkovidov, President and CEO of Sovcomflot, emphasized that a new fleet of higher efficiency is required to ensure year-round navigation on the Northern Sea Route.

According to him, 15 new gas carriers currently under construction at SC Zvezda will help meet the task. Those vessels will feature increased icebreaking capabilities and maneuverability in ice compared with the first generation of icebreaking LNG carriers (Christophe de Margerie series).

“In fact, the design of ships built for the Yamal LNG project foresees more intense support of icebreakers, – explained Igor Tonkovidov. – Meanwhile, the new series will be designed to feature higher independence. We expect the shipbuilders keep good pace and meet the delivery schedule”, explained Igor Tonkovidov.

Sovcomflot earlier emphasized that the commissioning of the LNG carriers would allow for the expedited implementation of national plans to boost cargo traffic along the NSR and to provide year-round navigation in the eastern sector of the Arctic.

Intensified shipping will certainly entail the need to develop ship repair in the region. A Memorandum on establishment of a manufacture for production of ship repair components was signed at EEF by Vera Shcherbina, Prime Minister of the Primorsky Territory Government, and Ivan Zdobin, General Director of Far East Shipyard LLC. The facility located in Podyapolskoye settlement of the Shkotovsky District will produce oversize metal structures and technological equipment for oil and gas projects in the framework of the Free Port of Vladivostok.

Infrastructure

As for the foreign trade via the Far East, we can speak about export/import and transit. Coal is the key export cargo crossing the ports of the Far East including Russia’s largest coal handling terminal Vostochny Port. Among the most promising market for exports of Russian coal is India.

“We were very excited to keep an eye on implementation of India’s programme aimed at development of the country’s steel and metal industry, unique in terms of scale and time. Of course, we lay high hopes on essential supplies of high quality coal produced Kuzbssrazrezugol to India”, said Irina Olkhovskaya, UMMC Director for Port and Rail Projects.  

Photo by IAA PortNews

“As of today, Vostochny Port accounts for almost one third of Russia’s coal exports to India – 2.8 million tonnes, - said Irina Olkhovskaya. – It is a promising and interesting market for us.”

Vostochny Port has completed its investment project on capacity expansion. The port’s export capacity has doubled from 25 million tonnes to 55 million tonnes.

“Full-scale implementation of the Eastern Polygon railway project plays the crucial role for boosting the turnover of coking coal, and metallurgical coal for India, in general, - added Irina Olkhovskaya. – It is BAM and Transsib development we are all looking forward to because the coal industry and the port industry are ready for additional volumes. “I am sure that close interaction between the heads of our states will let facilitate implementation of infrastructure projects and increase cargo turnover between Russia and India.”

When it comes to transit, good prospects for transportation of containerized cargo are offered by the Northern Sea Route as we wrote earlier >>>>, and by the railway across the territory of Russia. Both alternatives require development of container facilities at the Far East ports.

In this respect, EEF served as a platform for Vostochny Port JSC and RZD Business Active JSC (Russian Railways’s container operator) to sign a Memorandum on Cooperation in development of container transportation via Vostochny Port JSC. Within their competence, Vostochny Port and RZD Business Active will exchange their experience and analytical data for an optimal development of their joint service: Vostochny Port in the part of maritime transport, RZD Business Active – in the part of railway transport. The companies also agreed to join hands in attraction of shipping companies for the development of Vostochny Port’s new container terminal.

Besides, a new berthing facility is to be built at Commercial Port of Vladivostok by 2025. It will service ice-class ships and icebreakers operating on the Northern Sea Route. The port of Vladivostok can become an eastern construction hub for the Arctic container line.

“We will strive to establish transit hubs for cargo handling. A hub in Vladivostok will be connected with China, Japan, S. Korea and the railway, a hub in the west with the ports of Rotterdam, London, Antwerp, etc.... All that will let arrange a route with efficiency exceeding that of the Suez Canal”, commented Sultan Ahmed Bin Sulayem, Chairman of the Board of Directors, CEO of DP World.

Besides, COSCO (China) and MOL (Japan), which also took part in the Forum, expressed their interest in the development of shipping on the Northern Sea Route.

The above mentioned projects will certainly require essential investments and leasing can help in this context. According to Yevgeny Ditrikh, head of State Transport Leasing Company, STLC is ready to finance the projects on construction of Arctic container ships and hubs. He says the company is looking into construction of up to eight container ships of 6,000 TEUs each. Total investments are estimated at up to $2 billion. “STLC is ready to act as a partner in financing of container ships construction and in creation of hubs on the Northern Sea Route”, said Yevgeny Ditrikh.

To summarize, the Far East is becoming more and more significant region for the global trade. It is crucial to intensify infrastructure development with a focus on the railway capacity, construction of advanced and environmentally sustainable fleet, development of port facilities complying with the latest environmental standards and contemporary challenges.

By Vitaly Chernov

news@portnews.ru

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