Arctic Summer: Ships Set Sail through the Northern Sea Route

There is good news from the Arctic for the shipping industry.  According to data released by the Northern Sea Route Administration, the nodal agency of the Russian Federal Government which manages the Northern Sea Route (NSR), 330 applications from ships have been received since April 2013 informing the agency of their plans to transit through the NSR this summer. Of these, 213 applications were approved and 51 rejected. The reasons for rejection of applications and the fate of the balance 66 applications have not been made public. The bulk of the permitted vessels appear to be of Russian companies but a number of ships flagged in Norway, Panama, Bahamas and France have planned voyage through the NSR. Last year too, vessels under the flags of Panama, Liberia, and the Marshall Islands transited through the NSR reflecting the growing international nature of the Arctic shipping. 

These numbers compare favorably to the NSR sailings in the earlier years. In 2010, only four vessels took voyage and the number increased to 34 vessels in 2011. Last year, 46 vessels transited through the NSR including a LNG tanker which sailed from Hammerfest, Norway to Tobata, Japan covering nearly six thousand miles and saving nearly 20 days transit time. The increase in number of transits through the NSR has significantly improved the cargo volume from 0.800 million tons in 2011 to 1.30 million tons in 2012. It is estimated that the cargo volume through the NSR could increase nearly 10 times to 19 million tons by 2021.

There is good news for the energy hungry Asian countries too. The forecast suggests that nearly 25 million tons of oil and LNG extracted from the Russian Arctic could be transported through the NSR by 2021. Likewise, the container traffic through the NSR would be economically attractive between 2030 (1.4 million TEU [twenty-foot equivalent unit] in 480 transit voyages) and 2050 (2.5 million TEU in 850 transit voyages).

In essence, the cargo trade between Asia and Europe through the NSR is expected to go up and according to the South Korea’s Maritime Institute the NSR ‘could account for a quarter of Asia-Europe trade by 2030.’ The above figures are an indicator that the future of shipping through the Arctic looks bright and the route could be open for almost eight months a year.

However, there are a number of risks and challenges for the shipping industry. First, the Arctic region is known for extreme weather conditions, floating ice, fog, fierce winds, seasonal darkness, remoteness and poor accessibility. Second, there are limited passage support systems such as navigational aids, charts, communication systems, search and rescue (SAR) facilities and accident/distress response arrangements. Russia has drawn plans to put in place a number of safety measures to ensure safe transit of ships as also provide security cover to ships in distress. At the same time, the fears of an accident/oil spill in the pristine Arctic environment could be a disaster for the future of the NSR. The International Maritime Organisation (IMO), an arm of the UN, has established ‘Guidelines for ships operating in Arctic ice-covered waters’

Third, the environmental impact of increased shipping activity in the Arctic merits inquiry. The increased shipping would naturally result in greater human and commercial footprint with adversarial impacts on the marine habitat as also on the indigenous people. Likewise, the cruise ship industry is actively engaged in the Arctic and during the peak season as many as 8 liners sail a week between Greenland and Spitsbergen Island. Notwithstanding their strict adherence to ship discharges, the ships let out engine exhaust effluents which adversely impact on the environment.

Fourth, there are only three major Arctic port i.e. Churchill (Canada), Murmansk (Russia), Prudhoe Bay (US).  In 2012, Iceland announced plans to build a new port at Finna Fjord which will be ‘free of ice all year round’ due to the warm Gulf Stream.

Since most of the NSR runs through the Russian Arctic, the Northern Sea Route Administration provides services to ensure that the NSR is safe and secure for global traffic. A number of robust measures to respond to search and rescue (SAR), accident / distress calls, oil spill and dissemination of the prevailing hydro-meteorological and ice conditions in the NSR are being developed.

The shipping activity in the Arctic is expected to grow in the coming years and offer opportunity to a number of businesses including shipbuilders, energy and metal companies, freight forwarders and ancillary industries related to shipping. Also, as the cargo volumes increase, the freight costs will reduce further adding to the attractiveness of the NSR. Several Asian countries, particularly, China, Japan and Republic of Korea can be expected to integrate NSR in their marine transportation strategies.