Increased traffic predicted as Russia pushes Arctic short-cut between Europe and Asia.

This year’s season of sailings of the northern sea route across Russia’s far north is about to open with more vessels than ever registered to use the short cut between Europe and Asia. The number of vessels that have used the route as a transit has increased in the three years since the Russian authorities began promoting the option to international shipping. Around 34 vessels made the journey last year, up from 4 in 2010. Last year, more than 800,000 tonnes of oil, gas condensate or iron ore was shipped to Asia. This year that could top 1.5m tonnes.

Rosatomflot, the Russian state-owned operator of nuclear icebreakers is expecting the season to start within weeks with smaller vessels, around 20,000 dwt, being the first vessels to be escorted by its icebreakers. Larger vessels, particularly tankers and those too deep to take the route that skirts closer to the shoreline will take the more northerly route from July. If conditions remain favourable the season could last until November according to Rosatomflot assistant director Mikael Belkin, who gives a five-month window. Most of the cargo is industrial, comprising oil and gas condensate and iron ore.

Among the vessels registered to sail from Europe to Asia is the gas ship Ribera del Duero Knutsen, the only ice-class 1A LNG tanker in the world. It has been booked to load a cargo of LNG at the Norwegian Snovit project bound for Japan and will be the first gas ship to sail the route. The Russian authorities are reportedly finalising the contract details for the vessel.

After the season has closed for freight tonnage, several non-Russian icebreakers will need to be repositioned from Alaska to the Atlantic for the north European winter.

A seminar organised by Rosatomflot in Moscow recently drew cargo and ship owners interested in making the most of the shorter route between Asia and Europe. Mr Belkin concedes that the route is being marketed to complement the traditional routes via the Panama and Suez canals.

A lot of the interest is from within Russia. Russia’s independent oil major Novatek has expressed its intention to use the northern sea route to ship LNG from the Yamal field when it comes on stream, which could be in 2016. There is also a rumour that Gazprom could convert all natural gas extracted from the delayed Shtockman field into LNG, making it easier to ship internationally, including to Asia where prices remain substantially higher. Other oil and gas projects in Russia’s Arctic are potential users of the northern sea route to feed the appetite of Asian countries.

“My comment: Bear in mind that these vessels are super-burners that use super grade fuel. I am not sure if there  is any media follow-up to the Arctic navigation; maybe we need to start asking questions about  potential harmful effects” 

One key issue with using the northern sea route is utilisation of the return leg. Owners and charterers that have sent ice-class 1A vessels east have found it difficult to secure return cargoes and must pay heavily for a return ballast leg, or return west through the longer Suez or Panama canals.

Novatek intends to use the northern sea route to secure cargoes for east and west, a policy that will help Rosatomflot to reposition the icebreakers during a profit-making escort service. However the use of the northern sea route will only increase when markets become more favourable.

Eurochem, an iron ore shipper and one of the main users of the northern sea route in 2010 and 2011, has said it will use the NSR more when the markets improve. Standard dry bulk rates are sufficiently low to make the fuel savings from using an ice-class vessel on the NSR negligible.

Rosatomflot said it expects 300,000 tonnes of Eurochem cargo to transit this year, a good volume for the northern sea route, but a small percentage of Eurochem’s annual cargoes.

Eurochem is believed to have the potential for 3m tonnes of iron ore annually from Murmansk, which could go via the northern sea route of there is enough ice class tonnage and the price is competitive enough.

Source and further information Lloyds List