Maxim Kulinko: Rosatom works purposefully to create modern Northern Sea Route infrastructure
Maxim Kulinko, Deputy Director of Rosatom State Atomic Energy Corporation’s Northern Sea Route Directorate, talked with Arctic.ru correspondent Kristina Khramtsova and discussed ways to increase freight traffic volumes to 80 million metric tons by 2024. They also talked about measures to offer year-round navigation.
FULFILLING THE PRESIDENT’S MAY 2018 EXECUTIVE ORDER
Question: In May 2018, President Vladimir Putin signed an executive order on increasing the Northern Sea Route’s freight volume to 80 million metric tons by 2024. Do shipping companies and the manufacturers have the assets and enough infrastructure along the Northern Sea Route (NSR) and in Arctic ports to deliver the kind of volume in the president’s executive order?
Maxim Kulinko: Certain basic projects can increase freight volume to 80 million metric tons. In late 2020, Russian Prime Minister Mikhail Mishustin visited Murmansk and instructed corporate managers to deliver more freight via the Northern Sea Route by 2024. The breakdown is as follows: Novatek: 35.5 million metric tons; Rosneft: 30 million tons; Gazprom Neft: 6.7 million; Norilsk Nickel: 1.7 million, for a total of about 74 million metric tons. The instructions include these volumes. Considering the other projected freight volumes, the presidential target will be attained.
Regarding the infrastructure, Gazprom Neft’s Novoportovskoye oil and gas condensate field and Norilsk Nickel are projects with the infrastructure capacity. Novatek projects for liquefied natural gas production already have some of the required infrastructure. Long-term corporate step-by-step development plans are in place. The Rosneft project is developing in a similar manner, and a port in Sever (North) Harbor will be built prior to creating the needed infrastructure in 2023-2024. This port will also have the necessary capacity.
Question: What are the risks that could hamper plans for achieving 80 million metric tons target?
Maxim Kulinko: In 2020, everyone was surprised to see energy markets plummet due to the pandemic. Some investors had to postpone their project plans; we see this as a key risk because it affects market relationships.
Question: Many experts doubt the possibility of hauling 80 million metric tons of freight by 2024. As a method for boosting the Northern Sea Route’s freight traffic volumes to these levels, it was suggested expanding the NSR’s water surface and including Murmansk and Petropavlovsk-Kamchatsky. Is this possible?
Maxim Kulinko: Yes, we were instructed to monitor this possibility. Everything began when the Ministry for the Development of Russian Far East and Arctic and we suggested including a new term: the Northern Sea Transport Corridor, in the Strategy for the Development of the Russian Arctic until 2035. This was conceived as a legally sound concept and as a new geographical term or notion defining or outlining a new transport corridor for the Eurasian continent that could promote sustainable economic ties between Russia’s northwestern part and Far East, including the NSR, without changing its legal status and without running counter to international law. Tying regions like Arkhangelsk, Murmansk and Petropavlovsk-Kamchatsky together via an integral maritime trade chain is seen as an important managerial decision. This also has major implications for global logistics that include international transit matters.
While discussing the strategy, it was suggested that the new concept should not be introduced. Instead, we instructed a number of federal government agencies to study the possibility of expanding the Northern Sea Route, which officially spans the territory from Murmansk to Kamchatka.
We met with the Ministry of Transport, the Foreign Ministry and other concerned parties. They all agreed that, at this point, it was premature to interpret the Northern Sea Route in broader terms.
Citing international practice, the Foreign Ministry noted that it could mislead our foreign partners in some ways, but that’s not the main thing.
Most importantly, under the 1982 UN Convention on the Law of the Sea, coastal states have a right to pass non-discriminatory environmental protection legislation inside their exclusive economic zones, provided that these waters are blocked by ice formations that pose a major navigation hazard most of the year. In other words, the NSR needs a special procedure to authorize the passage of ships. This procedure is related to a ship’s technical specifications and to the seasons. By the way, the same regulations apply to Canada’s Northwest Passage.
The Russian Federation’s Merchant Shipping Code clearly defines the Northern Sea Route’s boundaries. Legally extending the NSR to Murmansk and into ice-free seas could cause many negative questions internationally. Officials from the Ministry of Transport expressed a similar concern. The NSR’s Directorate also had some questions regarding property and infrastructure management in the event of expanding the NSR. So, this approach was suspended.
At that time, many people believed that the Northern Sea Transport Corridor concept had something to do with efforts to increase the NSR’s freight volume to 80 million tons; but this was not the case. It actually implies the creation of stable national maritime transport communications and the socio-economic development of coastal territories.
We have input that supports the advantages of this approach. The governors of the territories bordering the NSR and maintaining economic ties via Arctic waters have suggested the concept of the Greater Northern Sea Route from St. Petersburg to Vladivostok, including the ports of Murmansk and Arkhangelsk, Kamchatka and Sakhalin. This approach would allow these regions to obtain additional state support for some infrastructure projects.
The other day, the Russian Government held a conference on coastal freight traffic. The participants mostly supported the governors’ initiative and issued instructions on assessing this proposal more thoroughly. I would like to note that this alternative would make it possible to transport at least 80 million metric tons of freight by 2024 exactlyvia the Northern Sea Route.
ATTAINING STRATEGIC TARGETS
Question: The Strategy for the Development of the Russian Arctic until 2035 notes that the Northern Sea Route handled 31.5 million metric tons in 2019, and that 130 million metric tons are stipulated for 2035. How can we achieve this kind of growth?
Maxim Kulinko: This can be accomplished partly by further expanding large LNG production projects, and projects for producing crude oil, copper concentrate and coal. Our colleagues have compiled specific plans for this. I would even say that 130 million metric tons is conservative.
A working group for cooperating with investors, part of the State Commission for Arctic Development, has predicted the NSR’s freight traffic volumes until 2035. According to our estimates, freight volume in 2035 is to exceed this total. The breakdown is: Yamal LNG: 19.7 million tons; Arctic LNG 2: 27.9 million tons; Arctic LNG 1: 22.8 million tons; Vostok Oil: 115 million tons and the Syradasaiskoye deposit: 30 million metric tons.
We also expect freight transits to increase. I won’t go into these statistics because the analysts give us different estimates. Nevertheless, we expect freight transits to make a substantial contribution to increased volume by 2035.
Question: Plans include year-round navigation along the NSR in 2025-2030 under the Strategy for the Development of the Russian Arctic until 2035. Why can’t this be done during the initial stage, that is, in 2020-2024?
Maxim Kulinko: We should clarify what part of the NSR we’re talking about. The western section already provides year-round navigation. So far, the eastern section infrastructure, including icebreaker support, the availability of ice-resistant freighters, safety, the preparedness of emergency rescue divisions, and communications, prevent us from providing year-round navigation. We are methodically creating a modern infrastructure that will meet the best international standards, despite the adverse weather conditions and other factors.
Apart from a series of Project 22220 icebreakers, we hope very much that we will make substantial headway in providing year-round navigation, and once the Project 10510 Rossiya icebreaker, the Lider class, is completed. We expect it to enter service in 2027.
Question: In one of his interviews, Director of Rosatom’s Northern Sea Route Directorate Vyacheslav Ruksha noted that three icebreakers would make it possible to launch regular year-round navigation.
Maxim Kulinko: I believe his words were misinterpreted slightly. The Russian Arctic will require ten nuclear icebreakers by 2030. Of this number, five icebreakers would operate in the western section, and three would be on duty in the most difficult areas of the eastern section. The other icebreakers would escort individual shipments.
NORTHERN SEA ROUTE INFRASTRUCTURE
Question: Regarding infrastructure, what is the state of Russia’s Arctic ports? How does this influence the implementation of your goals?
Maxim Kulinko: Most of our Arctic ports were built during the Soviet era. Of course, we would like them to be more advanced and to handle specific commodities.
For example, Tiksi, which years ago used to handle about 1 million metric tons of freight, has now become a shallow port. Some piers, quays and related infrastructure won’t allow modern ambitious investment projects. However, the port continues to operate and facilitates summer freight transloading.
On the other hand, the specialized Sabetta port, built by Novatek, is needed for the largest Arctic LNG project. It ranks among the most advanced Russian port facilities.
We are now planning to build new ports under new investment projects, including coal projects and the Baimskaya ore zone. These ports or terminals are currently being designed, and they will meet top world standards. By the way, a new terminal will be built not far from Tiksi, near the village of Naiba, because the waters there are quite deep, and sea-going ships with a draft of ten meters will be able to dock there.
The situation varies from port to port. This is why the Russian Prime Minister has instructed the Ministry of Transport and the concerned agencies and organizations to draft a strategy for developing the Russian Arctic’s ports and to link them with road, railway and air transport. We are involved in this, and the results are to be included in the Transport Strategy until 2035.
Question: Are you prioritizing the construction of new ports or the reconstruction of existing ones?
Maxim Kulinko: It depends on the economy. It is quite expensive to build all-new Arctic infrastructure. We will redevelop or build new ports as freight volumes require. For example, Pevek can handle the potential freight volume, and a strategic investor is available there. Rosmorport is currently completing the reconstruction of the old port’s piers; and an entirely new terminal, to be built near Cape Naglyoinyn, will help develop the Baimskaya ore zone.
New energy generating facilities will be created. Small floating power stations will generate electricity. Piers for shipping the ore we plan to extract will also be built. Again, the development of new ports under current conditions is largely dependent on specific investment projects.
Question: Are you creating an emergency evacuation and medical assistance system for ship crews in the NSR region?
Maxim Kulinko: Plans for this are underway. The High Seas Rescue Service, under the Federal Agency for Sea and Inland Water Transport, is responsible for emergency rescue operations along the NSR. Our colleagues have included the funding for new search and rescue ships.
The Rosatom State Atomic Energy Corporation has drafted and approved a roadmap listing the required rescue equipment, as well as for containing oil spills and upgrading medical units aboard nuclear icebreakers. We are also planning organizational measures along with the Ministry of Transport and the Federal Medical and Biological Agency. We have some tough deadlines, but Atomflot is already providing nuclear icebreakers with all of this equipment.
The Ministry for Civil Defence, Emergencies and Disaster Relief is also working on this. The chain of comprehensive Arctic search and rescue centers will continue to expand. Significantly, our colleagues are set to expand the helicopter fleet.
It appears that, while implementing all these plans, we will be able to ensure comprehensive search and rescue preparedness along NSR sections. For example, icebreakers will assist ship crews through pack ice formations. The Emergency Ministry’s helicopters, that meet tough Arctic standards, will airlift sick or injured crew members from any ship to a medical clinic on the mainland where they can receive treatment or surgery.
Question: Are you planning to build additional icebreakers in the Project 22220 series?
Maxim Kulinko: The Russian Prime Minister instructed us to submit proposals for expanding the icebreaker fleet. We submitted our preliminary estimates to the Government. It turns out that at least two additional Project 22220 icebreakers will be built in addition to the five planned ships in this series; they should enter service in 2030. It would also be helpful to build at least one more Project 10510 Lider-class icebreaker; the lead ship in the series should enter service by 2030. Any shipbuilding decisions need to be adopted before 2023.
But we have to coordinate all these plans with our partners and key investors, and we have to assess the planned freight traffic volumes. So far, organizational-analytical work is underway, and no final decisions on building extra icebreakers have been made.
THE NORTHERN SEA ROUTE’S TRANSIT POTENTIAL
Question: What do you think about the Northern Sea Route’s transit potential?
Maxim Kulinko: I don’t want to make any forecasts. Again, the analysts all offer different estimates. But I would like to note that transits nearly doubled last year. In 2019, it was about 600,000 to 700,000 metric tons, and it reached almost 1.3 million metric tons in 2020.
Indeed, our foreign partners are testing the NSR. Of course, they are offering many comments and suggestions on how to improve the infrastructure and navigation safety. Everyone is interested in the Northern Sea Route as a new route to supplement the Suez Canal. This is particularly topical given the latest incident that temporarily shut down the Suez Canal. The development of global trade inevitably requires cargo distribution alternatives. Shipping lanes must provide fast, safe and economically competitive services.
Question: What can get in the way of these plans?
Maxim Kulinko: Infrastructure restrictions are the main obstacle. First, we need purpose-built, ice-resistant ships, which cost more than those for the southern seas. We also need substantial icebreaker support because all Atomflot icebreakers are currently involved in various projects. Consignors now use the NSR only from June through November when no icebreakers are needed. In 2020, the first ship sailed on July 29 and the last one on November 10. We need a permanent shipping lane to provide year-round transits. Icebreakers need to ensure unimpeded navigation along the most difficult sections of the NSR, and other ships need to sail on schedule any time of the year.
Safety matters are second. With Roscosmos, we are now discussing various satellite cluster versions and configurations because remote sensing satellites still don’t provide enough data for the NSR’s eastern section. Today, it is impossible to predict ice movements and routes for escort icebreakers, but we would like to improve the quality of these services.
Third, we need to analyze emergency rescue preparedness levels. The Federal Agency for Sea and Inland Water Transport needs to deploy the relevant on-duty ships for assisting any ship in distress.
Fourth, we need to resolve aviation matters. The Emergencies Ministry needs the aviation capability, primarily helicopters, for search and rescue operations.
Of course, we need to more actively cooperate with key shippers and consignors and explain the specific advantages of using our sometimes severe but shorter route.
Question: It turns out that we have enough icebreakers to handle 80 million tons. Why can’t we allot them for transit traffic purposes?
Maxim Kulinko: We need a clear idea of annual freight volumes to allot icebreakers for freight transits. We would need more of them in the event of traffic volume increases. Once again, all unfinished and available icebreakers are intended for specific projects only. We cannot operate an icebreaker on a shipping lane unless we know who will be using it. The economy of this will not allow more flexibility. We have to meticulously evaluate our needs and then workout how to achieve them.
Question: Many logistics analysts now say that Suez Canal congestion will help expand Northern Sea Route traffic. What do you think?
Maxim Kulinko: This will not happen in the short-term. NSR transits will expand considerably after we start providing world-class services and infrastructure; this, in turn, will facilitate all-year, safe and rhythmic navigation patterns. Apart from icebreakers, we need ice-resistant freighters and container ships. So it is necessary to build a sufficient number of these ships. And, most importantly, we need enough freight volume with a penchant for the Northern Hemisphere. You see, it is economically inadvisable to deliver goods manufactured, say, in southern China or in the South Asian countries via the Northern Sea Route. It doesn’t matter whether the Suez Canal is clogged or not. Ships that can navigate southern seas alone will bypass Africa. But in the ensuing year NSR routing certainlyoffers new long-term opportunities.
Question: How successfully can you and foreign companies expand shipping via the Northern Sea Route?
Maxim Kulinko: We are ready for mutually beneficial cooperation with all countries and foreign companies assuming it is based on equality and respect, and we are working to expand this kind of cooperation.
Foreign investors are involved in many projects along the Northern Sea Route. Ships belonging to Japanese, Greek and other companies carry goods, including LNG.
At the same time, German, Danish and Norwegian companies are looking hard at the route, and they helped increase 2020 transiting numbers.
The Rosatom State Atomic Energy Corporation also has an entire department for expanding the Northern Sea Transit Corridor project that encompasses part of the NSR and which has ports and hubs in the Far East and Murmansk. The goal is to attract international traffic, so our colleagues are working together with our foreign partners.
The Northern Sea Route’s Public Council includes representatives from key Russian and foreign companies in global logistics, research projects and technologies and those involved in NSR related projects. We are working together to evaluate carriers’ requirements, such as improving NSR infrastructure, services and the investment climate. Some problems have already been eliminated, and I am confident that we will accomplish all of our objectives.