Research: CHNL’s Arctic 2030 Project

The Ministry of Foreign Affairs of Norway rewarded CHNL an ARCTIC 2030 grant on the 10th of April 2015 for the project “Feasibility and Reliability of Shipping on the Northern Sea Route and Modeling of an Arctic Marine Transportation & Logistics System”. The grant amount is NOK 2.4 million for the project period April 15, 2015 to December 31, 2016.
CHNL’s project partners are: 1) the Insitute of Arctic Logistics of the Youngsan University in Busan, South-Korea; 2) FSUE Rosatomflot in Murmansk, Russia; 3) Department of Marine Technology at the Norwegian University of Science & Technology (NTNU), Trondheim, Norway; 4) DNV GL's Arctic Operations & Technology, Hørvik (Oslo), Norway; and 5) the Norwegian Shipowners’ Association, Oslo, Norway.

Norway-South Korea-Russia Joint Project

The project is a joint research venture with our South Korean partner, Institute of Arctic Logistics (IAL) of Youngsan University in Busan. A Letter of Intent for Joint Cooperation was signed on the 14th of September 2012 between CHNL and IAL. The CHNL-IAL project is in line with MOU between Norway and South-Korea signed on the 12th of September 2012 “promoting joint projects in maritime transport in areas in which the two sides have common interest”. The MOU’s paragraph 4.4 states that “each side will bear its own expenses accompanied with the bilateral joint projects unless otherwise jointly decided by the two parties”.

IAL and CHNL have had cooperation and participated in several conferences, including: 1) CHNL's organized international conference in Murmansk (Feb 2012) on transit navigation on the NSR; 2) Governmental Norway-South Korea MOU meeting and seminar in South-Korea (Oct 2013) and Norway (Nov 2014); 3) CHNL's co-organized Arctic shipping conference in Alaska, USA (Nov 2014); and 4) Third Arctic shipping cenference in Ulsan, South-Korea (Nov 2014).

FSUE Rosatomflot has been CHNL’s partner for 4 years in operating CHNL’s NSR Information Office in Murmansk, Russia. Rosatomflot has been providing CHNL with information relating to transport via the NSR and maritime operations in Russian Arctic waters. Rosatomflot was also CHNL's partner in organizing in 2012 in Murmansk “The First International Conference on Transit Navigation on the NSR” attended by 110 participants from 13 countries.

Project Description

The project goal is to perform a comprehensive analysis of the current commercial transport and logistics operations, operational efficiency, cargo base, costs, infrastructure needs, security and safety of transit shipping along the Northern Sea Route (NSR) - with the aim of providing the needed data, performance indicators, and scenarios for assessing the feasibility and reliability of using this alternative shipping route in the future by Norwegian and South-Korean commercial shipping companies.

A detailed feasibility assessment of transport along the NSR has not yet been done, but is now badly needed for the shipping industry to be able to better assess future importance of NSR and Arctic operations for their business and marine transport needs. Shipping activity is increasing in the Arctic, primarily as a result of oil, gas and mineral exploitation in the Barents and Kara Seas but also off the coast of Alaska. These commodities need to be transported from onshore and offshore fields in the Arctic to markets in Europe, America or the Far East on a year-round basis and increasingly the best way companies see to accomplish this is through marine transport with specially designed ice-strengthen cargo ships (such as LNG carriers, tankers and dry bulk cargo vessels). China, South Korea and Japan are also interested in future prospects of transit transport on NSR with containers and vehicles.

But which are the some of the key factors to consider for NSR to develop into predictable and commercially viable trade route attracting large volumes on recurring basis between markets European and Asian markets? The main determinant will always be the availability of cargo, transport safety and reliability, and competitive cost levels compared to other more southerly routes (Suez/Cape).

The proposed study aims at providing Norwegian and South-Korean commercial shipping and support industries (major service providers for the oil and gas industry and logistics operators) with critical data and information on current transport and logistics operations on NSR so they can better assess their involvement in future transport and infrastructure development projects (and investments) in the Arctic and along the NSR.

The core element of the study is a feasibility study and cost-benefit-risk analysis for using NSR on a sustainable basis for commercial shipping companies – increasing profits by significantly saving time and costs of delivery of different cargoes, as well as reducing the amount of CO2 and stack emissions into the atmosphere, and potentially increasing the competitiveness of the Norwegian industrial sector. Overall cost savings depend on the type of cargo being transported. A shorter shipping route for an expensive LNG tanker can add up to substantial savings.

Seven Work Packages (WPs)

WP1 NSR Legislation, Tariff System & Insurance: Study of the current Russian NSR legislation, tariff system, and overall NSR governance and management system; insurance in Arctic waters; and assessment of international legislation including survey of possible impacts of a new mandatory IMO Polar Code on NSR future development.

WP2 Marine Transport Infrastructure: Assessment of ports and terminals along the NSR; icebreaking and ice-pilotage services; and analysis of the availability of ice class cargo ships in different segments and sizes for possible use on the NSR. Russia’s SAR and oil spill response facilities and available technologies on the NSR; and current NSR’s navigational aids and communication system.

WP3 Sea Ice and Operational Conditions for Ships: Analysis of dynamic changes in sea ice and other weather-related conditions for 2008-2016 on the NSR during the navigational season (July-November) and how ice conditions are related to Russia's admittance criteria for ships to enter the NSR; evaluation of same conditions for the remaining months of the year; and Russian’s long-term forecasts for sea ice in the Arctic as well as sea ice forecasts from other sources.

WP4 Cargo Base: Potential cargo for transport along the NSR, analysis of cargo types, port locations, volumes and prices. Collection of data regarding the distribution of cargos transported through the ports of the Barents Sea-Kara Seas, Norwegian Sea, Baltic and North Seas; and also collection of data on possible cargo transport from Asian ports to European markets.

WP5 Cost-Benefit-Risk Analysis: Analyses of advantages and risks of marine transport on NSR vs. Suez/Cape for different types of cargos and vessel sizes, including LNG, liquid cargos, dry bulk cargos, heavy equipment, vehicles, and containers.

WP6 Future Arctic Marine Transport and Logistics System (MTLS): Based on the current infrastructure already in place (evaluated in WP3) this part of the project will suggest what type of support infrastructure and logistics system is needed along the NEP/NSR so commercial shipping will becoming interested in using the route as a possible future trade route. Identifying the main structural and design characteristics of a new transport and logistics infrastructure for reliable and safe cargo transport; GIS maps highlighting the various components of the whole transport and logistics system; and estimating the cost of various infrastructure components and assessment of different funding mechanism in financing long-term capital-intensive infrastructure projects crossing borders within the Arctic.

WP7 Project Management and Dissemination of Project Results: Total of six main reports highlighting the results of the WPs and a final report (book); six scheduled workshops, one for each WP; and presentations at a number of international conferences. Results of the study will also be displayed on the CHNL, NSR IO, and ARCTIS websites.

Both the Norwegian Shipowners’ Association and the Korean Shipowners’ Association are interested in future possibilities for transport on the NSR but repeatedly haves stated that more information is needed about actual operational conditions and risks, the Russian regulatory framework, and the overall cost effectiveness and reliability of transport. This study will provide such critical data so companies can make informed decisions about their business activities and operational challenges in the Arctic. The study will also contribute to the development of more efficient and sustainable Arctic marine infrastructure and logistics solutions, by highlighting what kind of infrastructure is needed based on specific Arctic conditions.