Arctic // Analysis

31 january 2013

Developing the Arctic Territories Efficiently

Alexei Fadeyev PhD in Economics, Head of the Production Support Department at Gazpromneft-Sakhalin

Photo:
observatorioredes.blogspot.ru

Due to its vast hydrocarbon reserves and the greater role played by fundamental factors determining political and energy security, many industrialized states regard the Arctic as a key strategic region. Its industrial development would see intensive oil and gas production, extraction of biological resources, massive cargo transshipment and, that would in turn require better transportation and the relevant infrastructure. International cooperation in this field is vital for the region’s efficient and safe advancement, since organizing transport services is technologically complicated and legislation in the different Arctic states varies greatly.

Transportation Interests in Russia’s Arctic Zone and Infrastructure Status Today

The extensive development of the Arctic in the near future requires scores of new solutions, some of which should produce highly effective breakthrough technologies, as well as sophisticated approaches to logistics support for remote facilities, vehicle propulsion and ensuring minimal impact on the fragile environment.

Russia possesses unique transportation and logistics capabilities and can therefore play a major role in converting the country into a competitive transit territory with an advanced services sector and a service economy.

The full-scale realization of its transportation and transit potential seems most promising. It would involve creating a network of international transit corridors across the territory and waters under Russia’s jurisdiction, in addition to the development of a capillary transport infrastructure to connect remote Arctic communities.

Poor and sometimes nonexistent transportation infrastructure causes a mismatch between the significance of resource development in Russia's polar territories and the continental shelf and national security requirements. This undermines Russia’s competitiveness, despite its exceptional geographical advantages. A comprehensive transportation system and infrastructure would not only remove existing hurdles to utilizing transit potential but would also clear away infrastructural restrictions on resource activities in the Russian Arctic Zone (RAZ).

Photo: Rossiyskaya Gazeta: Belkomur Project

Arctic ports are less than promising, given the absence of long-distance railway lines, raising the importance of the Belkomur project that involves building the absent sections along the Archangelsk-Perm railway line (Karpogory-Vendinga), connecting the Archangelsk seaport with Syktyvkar, Kudymkar and Perm (Solikamsk). The line would carry products from these regions to foreign markets. To this end, projects such as the Sosnogorsk-Indiga (Barentskomur) and Vorkuta-Ust Kara lines seem especially important, as does the North-South corridor linking the Persian Gulf states, India and Pakistan with Central and East Europe and Scandinavia via the Caspian. Moreover, building the Polunochnaya-Obskaya railway line, completing the Obskaya-Bovanenkovo line to the port of Kharasaway, extending the Nadym-Salekhard railway line to Labytnangi, and continuing the Korotchayevo-Igarka railroad line to Dudinka and Norilsk would forge a link between the ore fields of the polar Urals and Yamal hydrocarbon deposits with industrialized areas in the Urals. [1]

Meridian railway lines to ports on the White, Barents, Kara and Laptev seas should boost the cargo potential of the Northern Sea Route (NSR) and open direct access to West Europe. Some complications can be expected from building the Salkhard-Nadym-Novy Urengoy railroad that to reach Igarka and Norilsk, as cargos may leave via the Dudinka connection, the NSR’s best link. This could mean the emergence of competition between railway and marine transportation with regard to tariffs, logistics and reliability. There would be growing demand for rapid cross-Polar transit, including air routes (similar to the shortest routes between the Eastern and Western hemispheres), and for a multifunctional transcontinental traffic route through a tunnel under the Bering Strait. Feasibility is based on the future use of the high-latitude Northern Transport Corridor: Russia’s multi-purpose sea-and-land route incorporating the NSR and its adjacent meridian river and railway communications. The cities of Murmansk and Petropavlovsk-Kamchatsky – its extreme points – would allow the transshipment of cargos to ice-class vessels, icebreaker servicing and feeder route support [1].

Photo: The Murmansk seaport could become
a major hub for long-haul and international traffic

Despite the numerous technical difficulties of Arctic sailing, the NSR offers the shortest route between Europe, the Far East and North America's western coast, which could be used not only for transit but also for Russian exports that are currently delivered to Southeast Asia via the Suez Canal. Interestingly, in recent years, government decisions have also stressed the NSR’s key role in developing the Arctic areas and resources.

There is now a clear and pressing need for the modernization of existing and construction of new seaports, export terminals, icebreakers and transport vessels, and for the creation of a marine platform for offshore geological survey and servicing.

The Murmansk seaport could become a major hub for long-haul and international traffic. Arctic offshore development and growing oil transport will inevitably transform Murmansk into the industrial base for future Arctic hydrocarbon projects [2].

Upgrading the Murmansk seaport and building offshore oil shipment terminals will provide solid grounds both for the development of the Murmansk transportation hub and its evolution into a major Russian and North European port specializing in the transshipment of oil, including that produced at offshore polar fields.

Table 1 offers data for assessing the transportation potential and future related projects in the Murmansk Region [2].

Table 1.Transportation Potential and Future Transport-Related Projects in Murmansk Region

Nr. Project Planned Activity
1 Developing marine transportation
  • reconstruction work to coal terminal Murmansk seaport, 9.6 million tons;
  • building a 20-million-ton coal terminal on the western coast of Kola Bay;
  • building a 1-million-TEU container terminal on the eastern coast of Kola Bay;
  • building a 35-million-ton oil terminal on the western coast of Kola Bay;
  • developing the water area for 350,000-ton vessels;
  • port fleet development;
  • building an eco-friendly bunker complex.
2 Developing logistics and warehouse infrastructure
  • building a distribution and logistics center;
  • building a logistics center.
3 Developing railway transportation
  • building a new Vykhodnoy-Lavna 28-km branch line;
  • building 10 new railway stations and yards;
  • reconstruction work on track at four stations;
  • reconstruction work on approaches (from Volkhovstroy station).
4 Developing highway transportation
  • developing the road network in Murmansk;
  • reconstruction work on the Kola highway.
5 Developing air transportation
  • reconstruction work to Murmansk airport

Modernizing the Northern Sea Route involves creating a well-organized system for the airlift servicing of Polar Regions through renovating the airport network and developing small aviation.

In the years to come, the Arctic air transport program should focus on ensuring it can meet consumer demand and air travel accessibility requirements.

Establishing a safe, workable airlift and logistics model for ensuring workers can reach remote locations is key to Arctic development. Advances in air traffic control should allow cross-polar flights, substantially cutting the expense involved in for cargo airlifts from Eurasia to America, in turn significantly expanding services offered to include passenger services. Russia seems to stand a good chance of transforming the NSR into a viable alternative to the Malacca Strait and Suez Canal, although certain technical and legal problems remain to be tackled.

Legal Basis for Arctic Marine Activities

Photo: A.Fadeyev
Delivery staff at sea mining complex

The Arctic waters’ legal status is defined by the principles and norms of common international law for the World Ocean, stipulated by the universally recognized 1958 Geneva Conventions on the Law of the Sea and 1982 UN Convention of the Law of the Sea.

The Arctic is rife with territorial disputes, one of them regarding the legal status of the Northwestern Passage (NWP) – a network of seaways through the Canadian Arctic Archipelago consisting of 19,000 islands, numerous rocks and reefs. [3]

The NWP issue does not, experts agree, question that it belongs to Canada, since the waterway passes thousands of islands that are indisputably Canadian. The issue relates to the long-running U.S. campaign asserting that the passage meets the legal requirements for an international strait as it connects two parts of the high seas (Arctic and Atlantic Oceans) and is used for international shipping. If this is the case, the passage is considered to be Canadian territory but must be open to foreign ships for transit.

Canada insists that the NWP is part of its inland waters, and has the same legal status as the River Ottawa or Lake Winnipeg. Accordingly, foreign vessels must request entry permission and fall under Canadian jurisdiction along the entire route. However, over the past century, Canada has changed its jurisdictional approach several times, providing grounds for accusations of inconsistency that weaken its stand. [3]

Expanding international cooperation in developing transportation lines in the Far North could provide solutions to numerous legal problems pertaining to operating in the Arctic.

As for Russian legal interests in the Arctic, the legal status of the Northern Sea Route, the national transportation line, is the priority. The issue here arises from climatic and hydrological factors that rule out a single fixed waterway.

Notably, Russia's legal standing on the NSR resembles Canada’s approach to the NWP. The United States would also oppose Russian claims that the NSR's key sections lie in its territorial waters.

In 1985, the Soviet Union backed the Canadian position when the United States sent its icebreaker through the Northwest Passage. Had Canada recognized Soviet claims toward the NSR, both states’ legal positions would have solidified, but this was the Cold War, and Ottawa was not in a position to take any such liberty.

Obviously, expanding international cooperation in developing transportation lines in the Far North could provide solutions to numerous legal problems pertaining to operating in the Arctic.

International Transportation Cooperation in the Arctic

Photo: aviationweek.com
The Ka-226TG, a modernized version of the
Ka-226T, is designed to meet the client’s needs
for operations in the Far North and on the Arctic
shelf, including in conditions of limited visibility
and rapid air temperature fluctuations.

The EU's Northern Dimension, covering Northern Europe, the Baltic and even Russia, provides a good example of a major international project aiming to develop Arctic transportation. It is focused on practical cooperation to solve problems relating to common challenges and opportunities, offering benefits both to regional countries and Europe as a whole.

In the transportation sector, the Northern Dimension will boost sea traffic volume between European and northern Russian seaports, in particular Murmansk and Archangelsk, which will form a credible alternative to ports in the Gulf of Finland and the Baltic Sea.

In terms of international cooperation, the Barents Logistics project, which aims to develop transportation and regional logistics in Murmansk Region, looks quite interesting since the Barents corridor is a major tool for improving regional logistics. Implemented in 2006-2008, and financed by the EU under the Kolarctic neighborhood program, the plan envisages developing the transport link from the port of Kemi to Murmansk via Salla.

Barents Logistics carried out a pilot container delivery along the new route, including satellite monitoring of time, speed and other parameters.

Barents Logistics 2 is the follow-up, designed to advance logistics competence and kow-how and to expand supply chains in the broader Barents region. Launched in 2011, the project is financed by the EU's Kolarctic ENPI CBC program.

Ru-No Barents with its special Logistics and Transport section offers another good example of international cooperation in the transportation field. The project aims to assess the gap between existing technologies (including logistics and transportation) and those required for the eco-friendly and safe production of oil and gas in the Barents, Pechora and Kara seas. The participants are involved in international working groups to assess transportation and logistics problems facing Norway and Russia in the Far North.

Participation in international Arctic projects is likely to make Russia a Eurasian maritime transport power with a major source of revenue.

The Northern Air Bridge project, which will organize flights from Asia to North America via the Arctic, with Krasnoyarsk Region connecting the two continents, is still in the pipeline. According to experts, the routes should primarily attract Southeast Asian countries, for which flying to North America via the Arctic is most convenient as it saves between two and five hours depending on the route.

Experts believe Arctic airlifts have the potential to be lucrative, provided the aircraft is loaded to 85 percent of its full capacity for the roundtrip, with 60 percent to be handled by points of arrival and departure that fall within the route network and which are striving to become commercially attractive hubs. Current transport flows do not guarantee these levels, but the situation could change due to Russia's WTO accession. Goods such as equipment for the hydrocarbon, mining and heavy machine-building sectors, pharmaceutics, foods and electronics hold most promise.

It is difficult to overestimate the role played by transportation lines and infrastructure in future large-scale international energy projects, meaning that Arctic transportation and logistics should focus on servicing.

Jointly developed by Gazprom and foreign partners, the Shtokman gas condensate field provides a graphic example of international Arctic cooperation and the organization of transport and logistics services unparalleled in complexity. The project involves establishing a huge logistics complex to cover deploying personnel to their work locations, cargo handling, transportation and the warehousing of heavy equipment. Crucially, the project is to be realized far out at sea, with work to be performed in harsh weather and under a condensed timeframe.

* * *

Maritime transportation services could become the Russian Arctic's second largest export issue after hydrocarbons. Participation in international Arctic projects is likely to make Russia a Eurasian maritime transport power with a major source of revenue. This position has the potential to act as a reliable insurance against risks related to plummeting prices on global hydrocarbon markets. Besides, the full realization of transport and transit opportunities promises to deliver powerful multiplicative and complex-forming effects.

The Arctic transportation system should be focused on the Northern Sea Route with adjacent railway and river lines, aviation, highways and coastal infrastructure. However, numerous problems need to be solved before the NSR can operate at its full capacity. These include establishing a single management system, ice escorting, and legislative amendments for state control and commercial shipping along the route, in addition to creating modern infrastructure to ensure polar shipping is safe thanks to hydrographic and icebreaker support.

These solutions will unquestionably require the government to play a major role, but also necessitate efficient international cooperation and the integrated consolidation of political and economic resources.

1. Konovalov A.M. Transport Infrastructure of Russian Arctic: Problems and Solutions // The Arctic: a Zone of Peace and Cooperation. Edited by A.V. Zagorsky. Moscow, RAS Institute of World Economy and International Relations, 2011

2. Fadeyev A.M. Improved Economic Approaches to Management of Hydrocarbon Development in the Arctic. Apatity: Publication of RAS Kola Research Center, 2012

3. Byers M. The Legal Status of the Northwest Passage and Canada's Arctic Sovereignty: the Past, the Present and Desirable Future // Moscow University Newsletter. Series 25. International Relations and World Politics. 2011. Issue 2

 

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