Dr. Bjørn Gunnarsson

Managing Director of CHNL

What will Influence the Short to Medium

Term Scenario on the NSR?

1. Sea-Ice Conditions

Time required for passage; ice conditions and waiting time; navigational

season now 4 - 4.5 months

Diminishing sea-ice during the summer navigation season and rapid

melting of multi-year ice

The possibility for year-round operations with high-ice class cargo ships

Sea-Ice Conditions

This image compares the sea ice extent minimum on Sept. 16 (in white)

to the average minimum during the past 30 years (yellow line). NASA

January

2011

February

2011

March

2011

April

2011

May

2011

Arctic Ocean Sea-Ice Cover 2011

National Snow & Ice Data Center (NSIDC)

July

2011

14. August

2011

5.56 m km2July

2011

August

2011September

2011

October

2011

November

2011

December

2011

Arctic Ocean Sea-Ice Cover 2011

National Snow & Ice Data Center (NSIDC)

2. Energy & Mineral Resource

Development in the Arctic

Energy and mineral resource development in the Arctic is now accelerating –

we need to come up with the right transport/logistics solutions to be able to

take full advantage of this potential without harmful effects to the Arctic

environment

Continued imbalance in resource production and needs – Asia vs. the rest

Transport of oil, gas, minerals, and equipment by specialized vessels –

tankers, LNG carriers, bulkers, and purpose-built offshore vessels

Natural Resource Transport in the BarentsNatural Resource Transport in the Barents

Oil and Gas in the Barents and Kara SeasOil and Gas in the Barents and Kara Seas

Map by Sherpa Consult AS

Source: VSEGEI/Rosnedra

Natural Resources of the Eurasian ArcticNatural Resources of the Eurasian Arctic

Ob/Irtyish to

Novy Port

Yenisey to

Dudinka

Lena to

Tixi

“Unlocking of Siberia”…

3. The Freight Market, Price Differences

& Time Sensitivity of Markets and Cargo

Cargo availability and price differences between Asian and Western

markets that will justify transportation between the markets; e.g. the

case of iron ore vs. oil and oil products

In order to attract more volumes to the NSR, one possibility could be

to differentiate between the different cargo types and not only the dwt

or cargo volume

The main factor will be the freight market level for different shipping

segments

4. Availability of Ice-Class Tonnage in

Different Segments & Sizes

Ice class 1A is required on the NSR at the time being

The number of vessels with adequate ice class will represent a limitation to

the utilization of the NSR during a short navigational season

As tonnage and cargo availability is difficult to plan there is a need for an

efficient processing of the application to trade the NSR. A processing time

of one month should usually be acceptable.

Perhaps accepting ice-class 1B during parts of the navigational season?

Perhaps the type of vessel should be reflected in the tariff for NSR?

A large scale investment is needed for the construction of a fleet of large

powerful ice-class cargo ships

5. The Costs & Fees of Sailing on the NSR

Cost elements such as insurance; NSR transit tariffs (laden and in ballast)

vs. Suez Canal tariffs; tariffs need to be commercially resonable; bunker

prices

NSR can offer much fewer return destinations with cargo than Suez/Cape.

It is important for the NSR to facilitate access to Russian ports for loading

and discharging along the route for non-Russian flagged vessels with the

purpose to create round voyage possibilities

Repositioning cost of vessels

Insurance fees need to consider thinning ice, optimized route and advanced

ice reconnaissance

Perhaps the insurance costs should be reduced when the transport volume

increases. Russian authorities should also investigate ways of reducing

perceived risk

6. Piracy Threat on the Suez Route

Piracy threat along the Suez Route and the cost of insurance and

protection; risk of non-delivery of cargo

7. IMO Polar Code Requirements

Will new mandatory requirements be too strict/costly for the commercial

shipping community? Issues such as fuel emissions (zero emissions?),

pollution prevention technologies, zero discharges, structural/design

requirements etc.

Draft of the Polar Code ready in 2012; enters into force 2016

8. Practical Information for Planning a

Voyage on the NSR

Access to reliable information about navigating on NSR, including

information on the Russian voyage approval process, rules and regulations,

and administrative procedures and fees – currently the approval process is

quite bureaucratic

Practical Information

Part 1

Arctic PortsPart 2

NSR/NEP

Part 3

Coastal

Navigation

•Navigational information

•Port cargo profile

•Port infrastructure

•Local rules and regulations

•Rates of port dues

•Tariffs for services

•Immigration control

•Customs control

•General area description

•Current NSR legislation

•Permission for NSR transit

•Sailing routes

•Ice conditions

•Icebreakers assistance

•Tariff system

•Search and rescue

•Environmental issues

•International fleet and

cabotage within the inland

Russian waters and EEZ

•Immigration and customs

boundary regime

•Necessity and conditions

for obtainment of a

cabotage permit

CHNL’s Arctic Logistics Information Office

9. Operational Knowledge on the NSR

Competence requirements for ice navigators and the crew; navigator

training; preparing for navigation under Arctic conditions, including safety

in Arctic waters

Convoys on the NSR in 2012

(Photo: Rosatomflot)

10. Better Aids to Navigation

Need for improved systems to support safe navigation in the Arctic Ocean

- Insufficent number of navigational charts due to lack of hydrographic data

Need for better real-time information concerning the operational environment.

This includes ice charts; satellite images of ice-infested waters; text messages

describing ice conditions; accurate marine weather information (forcastes for

sea ice distribution, wave hight, wind direction and speed, visability,

temperature and superstructure icing)

Communication difficulties - Need to improve voice and data transmission

coverage (MF, HF and VHF radios, INMARSAT, IRIDIUM constellation

satellites, Russian communication satellites)

11. Search & Rescue (SAR) Facilities

SAR is particularly challenging in the Arctic due to the remoteness and long

distances that are involved in responding to emergencies. The current SAR

infrastructure in the Arctic is very limited

The impact of cold, ice and harsh operating conditions on response

personnel and SAR equipment

Lack of adequate shoreside infrastructure and communications to support

and sustain a SAR response of any significant magnetude. Needed to provide

basic logistics and support functions for SAR missions

The potential number of people needed to be rescued from a cruise/

passanger ship far exceeds the capacity of SAR response in the Arctic. Lack

of sufficient food, lodging and medical facilites

Marine SAR in the Russian Arctic

From the Northern Sea Route Administration

12. Pollution Prevention & Response

Technologies

Oil spills in ice are more complicated to address than oil spills in open water.

The oil is less assessable in ice-covered waters; it can be spilled onto the ice;

in open pools between ice floes; in open channels behind the vessel; or under

the ice

There is no multilateral oil spill response agreement for the Arctic. Effective

Arctic oil spill response operations require advanced planning and

international cooperation. But, Norway and Russia have a bilateral oil spill

response agreement for the Barents Sea

All available oil spill response methods must be available and considered for

each situtation; mechancial recovery; chemical dispersion; in-situ burning;

and biological degregation (bioremediation)

Oil Spills in Arctic Waters

13. Arctic Ports & Terminals – Need for

Improved Facilities and Services

Lack of needed port infrastructure and support facilities in the Arctic.

Deepwater ports, places of refuge, marine salvage (ship repair), adequate

port reception facilities for ship-generated waste, and towing services are

rarely available in the Arctic

In recent years Russian Arctic ports in the Barents Sea area, including

Murmansk, have expanded significantly due to increased ore, coal and oil

production and transport

Central transshipment hubs play an increasingly large role in the

coordination of logistics. The NSR needs to have a transshipment

hubs in the west and another one in the east

The Atlantic-Arctic-Pacific Corridor

A

B

Kirkenes-Murmansk Hub

NSR

Europe/US

Kirkenes-Murmansk HubKirkenes-Murmansk Hub

Murmansk Harbour

Cargo transport through the Northern Sea Route will tenfold by 2020

according to estimates by the Murmansk authorities

The Port of Kirkenes

Port Development Projects in Kirkenes

14. Investment in New Icebreakers

If a vessel navigating in the Arctic Ocean has readily available a polar

icebreaker and marine salvage support, the risk to the vessel and

corresponding financial risk to owners and insurers is substantially

reduced

Government and private icebreakers are a key resource in the development

of the Arctic. The are some 50 icebreakers in the world fleet; the Russian

fleet is by far the largest and most powerful

The world´s icebreaker fleets are aging and will require significant investment

during the coming years to maintain their effectiveness and capabilities. The

average age of these icebreakers is 30 years

The Russian Icebreaker Project

from Rosatomflot

The Russian Icebreaker ProjectPrincipal Dimensions IB-60 Type

Length, m 173.3

Beam, m 34.0

Board height, m 15.2

Drought, m

Minimal

10.5

8.55

Water displacement, t

Minimal

33,530

25,540

Quantity and power of

turbines, kW

2 x 36,000

Shaft power, kW 60,000

Ice-free water speed,

knots

22

Ice passability, m 2.8-2-9

Shaft power to water

displacement

1.79

Crew quantity 75

from Rosatomflot

Operation of Russian Atomic Icebreakers)

Operational Time of Linear Icebreakers

Operational Time of Low Draught Icebreakers

Operational Time of New Universal Icebreakers

35

Icebreaker Start Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Taimyr 1989

Vaygach 1990

Rossiya 1985

Sovetskiy

Soyuz1989

Yamal 1992

50 Let

Pobedy2007

Universal Atomic Icebreakers (IB-60 Type)

1st IB-60 2017

2nd IB-60 2019

3rd IB-60 2021

If reactor resource is prolonged to 175 000 hours

If reactor resource is prolonged to 175 000 hours

from Rosatomflot

15. Political, Legal & Administrative Issues

The issue of sovereignty in an ice-reduced Arctic Ocean – possible

disputes over waterways and Arctic resources

Security issues – increased shipping will require an increase in monitoring and enforcement of domestic and international laws governing smuggling, environmental standards and ship safety

The legal and regulatory framework – needs to be customer friendly andreliable

Thank You!