Maxim Kulinko: “First-ever phase-by-phase approach applied to ensure year-round navigation on the Northern Sea Route”

In his interview with IAA PortNews, Maxim Kulinko, Deputy Head of the Northern Sea Route Directorate – Head of Rosatom’s Department for Development of NSR and Costal Territories, tells about the newly approved Northern Sea Route Infrastructure Development Plan, Arctic logistics, dredging and prospects of alternative fuels in the Arctic.

- RF Government has recently approved The Northern Sea Route Infrastructure Development Plan till 2035. What is, in your opinion, the purpose of this document for the authorities and private investors? Can it be expanded with new projects?

- According to the Ministry for the Development of the Russian Far East and Arctic, the Ministry of Transport, the Federal Marine and River Transport Agency and other federal authorities, constituent entities of the Federation and ad hoc bodies, it is a comprehensive document.

For the first time, a phase-by-phase approach has been applied to the NSR development till 2035. Actually, no previous documents said when year-round navigation should be ensured on the Northern Sea Route or what should be done for that. That particularly stipulates the calculations for the required group of icebreakers. Now, as the NSR Infrastructure Development Plan is approved, we are guided by a task to start year-round operation on the Northern Sea Route from 2025.

The Plan also covers emergency response issues. We are grateful to Yury Trutnev, Deputy Prime Minister - Presidential Plenipotentiary Envoy to the Far Eastern Federal District, who suggested that we should consider the Plan from the perspective of airport and railway infrastructure which can be potentially linked with the Northern Sea Route and supply it with cargo as well as from the perspective of medicine and personnel…

On the other hand, we acknowledge the changeability of life and do not view this Plan to be dogmatic. It should be improved and adjusted. I am sure that the federal authorities, the entities of the Federation and large investors can expand it with their projects.

We have decided, and it is foreseen by the document, that separate plans are to be adopted for specific investment projects approved by the Government of Russia. They will clearly describe the projects’ parameters, assign those responsible for implementation, set forth the terms. This scheme will respond to possible issues on the development of certain projects in the Arctic and responsibility for them.

- Are there enough icebreakers to achieve the task of 80-million cargo traffic on the Northern Sea Route by 2024?

- With the extended service life of the available icebreakers and the plan to build five new nuclear-powered ships of LK-60 design and one Leader class icebreaker (the contract is to be signed in 2020), that is sufficient for the current projects.

In view of the Federal Law on privileges in the Arctic developed by the Ministry for the Development of the Russian Far East and Arctic, implementation of new projects including ambitious ones is possible, primarily oil and coal projects. In this case, icebreaking assistance will have to be adjusted, perhaps.

I also remind about the plans of Novatek to build four icebreakers running on liquefied natural gas (LNG). The work on the final decision regarding the start of construction is underway. If our colleagues have those ships built, we think the fleet of icebreakers will be sufficient for operations on the Northern Sea Route. Moreover, that will let redirect our nuclear-powered icebreakers eastwards from 2025 to ensure year-round navigation on the Northern Sea Route.

- You have mentioned additional projects on shipment of coal and oil. What are their real prospects?

- As for oil, it is the Payakhskoye field being developed by AO Neftegazholding. Besides, our Rosneft colleagues are actively working on the Vankor field. As for coal, the most interesting projects are those of VostokCoal and Severnaya Zvezda.

It should be noted that neither Payakhskoye field nor the Severnaya Zvezda project have been taken into account for the cargo flow of 80 million tonnes. Nevertheless, we expect them to contribute to it and even let exceed the task.

We are somewhat concerned about coal port “Chaika” of VostokCoal. It should be said that according to an official statement we have received from VostokCoal, the beginning of the project implementation has been postponed from 2019 to the first half of 2020. So the project has not been commenced de jure yet.

According to the plan, the VostokCoal's project is to ensure annual shipment of 19 million tonnes of coal by 2024. Our forecast based on postponement of the project implementation by one year says that it will only be able to handle 12 million tonnes of coal by that time.

We are currently thinking over some compensatory measures to cover both coal and oil projects. In particular, Gazprom Neft is likely to launch three projects. They have entered the active phase of development while waiting for adoption of the above-mentioned law on privileges in the Arctic.

- What can be the share of transit in the total Northern Sea Route shipping?

- There are various estimates. When working on the Plan for the Development of the Northern Sea Route Infrastructure together with the Russian Government’s Analytical Center, we analyzed the possible cargo flow till 2035. Of course, official estimates based on the demands of companies, including foreign ones, are very modest so far. Our maximum by 2035 is 3 million tonnes per year. I would like to remind, that transit was slightly below 700,000 tonnes in 2019.

If hubs and transport-logistic centers are built in Murmansk and Petropavlovsk-Kamchatsky and if we manage to proceed with the construction of ice class container carriers (ships of 5,000-10,000 TEUs) or enter into a consortium with foreign shipping companies, the increase of transit cargo flow is quite possible.

Of course, implementation of those plans will be easier with the year-round navigation. Apart from icebreaking, transit cargo shipping on the Northern Sea Route should be provided with services ensuring safety, navigational guidance and emergency response.

In the framework of the NSR Public Council, we are currently working with our foreign partners including major players. They often raise questions related to availability of spare parts for transit ships, crew rotation, migration cards and procedures for crossing the border of the Russian Federation. These issues are definitely feasible. This should be done to reverse the negative attitude of foreign partners to the Northern Sea Route. Of course, we do not compare the Northern Sea Route with the Suez Canal – they are absolutely different – but it can be a perfectly good supplement.

- Are there any developments towards construction of container ships?

- There is no full understanding in this respect yet. Rosatom is working on this and the feasibility study is to be conducted in 2020. It is necessary to determine the architecture, tonnage and operational economics of a container ship. It is evident today that ships with ice class of up to Arc7 are inefficient when operated beyond the Arctic waters. Therefore, the project should be coordinated with the financial and economic model of the Northern Sea Route.

Moreover, the Ministry for the Development of the Russian Far East and Arctic is currently looking into introduction of a new concept – ‘Northern Sea Transport Corridor’. In some sense, it is a revival of the Soviet Union practices with Glavsevmorput responsible for the route between Murmansk and Kamchatka (The Northern Sea Route is currently between the Kara Strait in the west and the Bering Strait in the east). It is not a substitution for the Northern Sea Route but it is a more correct model for economic development of our northern waters. So the container line development project can be a part of the economic model for the development of the Northern Sea Transport Corridor.

- A group of countries under the International Maritime Organization (IMO) currently lobbies for a ban on the use of heavy fuel oil in the Arctic. If they succeed, how crucial it is for the NSR and Arctic development?

- The topic of using this or that fuel is very interesting as there are polar opinions on it.

From our part, we are ready to offer nuclear-power technologies as we consider them to be safe, reliable and quite effective. We have conducted a study to compare the economy of LNG and nuclear-powered icebreakers. Actually, within a period of 35-40 years, nuclear-powered icebreakers are to demonstrate a higher economic efficiency compared to icebreakers running on LNG even without taking into account the ships’ cruising range and endurance.

It is good for Novatek with its LNG ‘close at hand’ to use gas-powered icebreakers but if we speak about year-round navigation with limited opportunities for LNG bunkering, the efficiency of gas-powered icebreakers will be even less.

- While on the subject of LNG bunkering, do you plan to arrange points for fueling ships with gas in the Arctic?

- It is covered by the NSR Development Plan and our position (approved by the Ministry of Energy) is to  analyze thoroughly which areas of the Northern Sea Route really need the LNG infrastructure. It is not only about bunkering of ships but also about converting the heating system in our Arctic regions from heavy fuel oil to liquefied gas. Therefore, a separate comprehensive programme will cover the use of LNG in the Arctic. It is to be developed and submitted to the Government in 2020.

- When speaking about the alternative fuels, the NSR Infrastructure Development Plan foresees the use of methanol, not only LNG.

- Numerous experts believe that methanol is even more promising marine fuel than LNG. Of course, there remain a number of issues including engines, storage and reasonability of conversion to methanol. However, supposing that hydrogen will be increasingly widespread in the future with its higher efficiency coefficient as compared with LNG, methanol can carve out a niche as well.

We have recently discussed it with a well-known European shipping company focused a lot on methanol. LNG is good for icebreakers while placing LNG tanks on container carriers is not always reasonable. Methanol as a marine fuel can be more interesting in this case.

- Extensive dredging is required to implement all the port projects announced in the Arctic. How are things going under the projects on the Utrenny terminal and on expansion of the seaway canal in the Gulf of Ob?

- Indeed, there are ambitious tasks involving dredging, first of all that for the Utrenny terminal. All of them are to be completed by 2022.

The scope of dredging performed under this project in 2019 totaled 5.3 million cbm with RUB 3.5 billion of expenses. It is Mordraga that should be thanked, the company that was conducting dredging in 2019. They performed a really good work within an extremely limited period of time. Ice-free navigation period at the site is only 60-70 calendar days per year.

We have even more challenging tasks for 2020. Apart from the Utrenny terminal, we are to commence the reconstruction of the seaway canal in the Gulf of Ob. The estimates on the works to be done are different. The study being conducted by Krylov State Research Center nears completion with the reconstruction of the seaway canal in the Gulf of Ob alone preliminary estimated at RUB 40 billion. There is a variety of technological solutions. This work is to be used as a basis for design and estimate documentation and we plan to launch this project in 2020.

Besides, we should not forget about maintenance dredging the scope of which will be essential due to specific features of the Gulf of Ob with its storms and high sediment accumulation.

Moreover, dredging will be required under other projects on the Northern Sea Route including coal and oil ones.

- To pursue the subject of dredging, what do you think about the prospects of the national offshore dredging company that can be established under the NSR Infrastructure Development Plan?

- To meet all the above-mentioned challenges, the capacity of Russia’s dredging fleet should be expanded considerably. Therefore, we have to deploy foreign equipment.

Among the challenges of dredging works on the Northern Sea Route is a short navigation period for fleet mobilization, execution of works and removal of equipment before harsh ice conditions are in place.

We have a number of tasks set by RF Government’s Executive Office to explore the rationale for establishment of a special dredging company able to perform such works. No solution in pursuance of these instructions is ready but we are looking into creating a group of domestic dredging ships. It is not an easy task as the dredging ships should be deployed somewhere during hard ice conditions in the Arctic and this is not our core business.

- When it comes to the railway component of the Arctic logistics, which projects do you consider to be the most promising ones?

- In our opinion, the most realistic projects are the Northern Latitudinal Railway 2 (NLR-2) and the railway line to the Indiga port. I would like to emphasize that Indiga is not within the NSR zone and is beyond our area of responsibility.

Implementation of the NLR-2 project depends a lot on the position of Gazprom. It is studying different variants choosing between a railway line to Sabetta and a link to Kharasaway.

In view of the development plans till 2030 it would be more reasonable to build a line to Sabetta since it is the time when the development of the Tambey field with enormous gas reserves is to commence. The Tambey field is impossible without the railway infrastructure. Having created a railway foundation for Sabetta we will consequently have a multiplicative effect.

Within the five-year run, a branch to Sabetta can look less attractive as compared with a link to Kharasaway where a gas condensate field will be developed. However, production of gas condensate in Kharasaway is not to be that great (preliminary estimated at 8 million tonnes). So, a railway to Sabetta will undoubtedly ensure a far greater effect in the long run.

- What are the prospects of fish transportation along the Northern Sea Route considering the experience of using the Sevmorput container carrier?

- Throughout her single voyage, the Sevmorput made four port calls with Atomflot obtaining invaluable experience and fishing companies being quite positive about it: the cargo was delivered in time and none of containers became defrosted.

We are currently working to set this line ‘rolling’. For that purpose, we are looking into chartering other container ships. Preliminary calculations say it is viable to use two ships with capacity of 400 forty-foot refrigerated containers each.

Unfortunately, transportation from Kamchatka to Saint-Petersburg makes the route longer, hence our intention to arrange transshipment of reefer cargo in Murmansk. We are also considering the construction of a dedicated terminal there. We are currently looking for a site and power supply opportunities.

Loading for reverse direction is of high significance for this line. For example, Arkhangelsk offers plywood and prefabricated houses bound for China. This cargo can be containerized. It can also be fish for a return voyage: salmon can be transported from the Far East to the west and seasonal white fish extensively consumed in Asia can be carried from Murmansk. Besides, the ships can be loaded with food products and other cargo under the Northern Delivery project since the prices are different in the European part of Russia and in the Far East.

We have compared transportation of the Far East fish to the European part of Russia by sea and by railway. Shipping by sea can be more efficient if return voyage loading is ensured.

We have obtained an approval from the State Commission on the Arctic Development regarding extension of the seasonal container service on the Northern Sea Route as well as the instructions to cooperate with the Governors of the Murmansk and Arkhangelsk Region, Kamchatka and Saint-Petersburg to ensure loading for eastward voyages.

Interviewed by Vitaly Chernov.