Russian Arctic: new shipping routes and access to natural resources

Financial Times
Russian Arctic: new shipping routes and access to natural resources

Moored off the small Arctic town of Pevek is the Akademik Lomonosov — the world’s first floating nuclear power plant and a sign of how Russia's plans for the far east are taking shape. It is part of Moscow’s plan to open up a major shipping lane through the Arctic and bring natural resources within easier reach, Financial Times writes.

Pevek’s harbour is only ice-free for four months a year but is intended to become a hub for commercial shipping on the so-called Northern Sea Route as climate change gradually eases the passage through the Arctic. And the power provided by the Akademik Lomonosov is intended to help Pevek become a gateway to Chukotka, a region close to Alaska and rich in gold, silver, copper, lithium and other metals. “Without the NSR, without the port, there would be no Pevek,” said Maxim Zhurbin, Pevek’s deputy mayor, during an interview in the town in October.

Few in Pevek seem concerned by the nuclear reactor in the harbour. “Fear? We have none. Perhaps Russians are not afraid of anything any more. We have seen and lived through everything. We have to be optimistic,” said Igor Ranav, a locally born businessman. “We were told the plant is made with the latest technology and it is safe, and I hope so.” “It is excellent that it is here,” said Natalia Koveshnikova, a retired accountant who has lived in Pevek most of her life. “It is the first year we have had heating and hot water year round.”

Development of the NSR is in the hands of Rosatom, the state nuclear corporation. As well as commissioning the Akademik Lomonosov, Rosatom is also in charge of nuclear-powered icebreakers that the company expects will help to open up year-round Arctic navigation by the middle of the decade.

Rosatom has not revealed how much it is investing but insists its Arctic ventures will make a return. “For us it is mainly business. And creating the conditions for the projects now, we base it on the investment viability,” said Rosatom’s head Alexei Likhachev.

Upon full ramp-up by 2023, the nuclear plant in Pevek is expected to power several resources projects including Mayskoye, a gold mine developed by UK-listed miner Polymetal, and Pyrkakay, one of the country’s largest tin deposits.

Rosatom plans to install four more floating nuclear plants by the end of the decade across the Chaunskaya Bay to provide power to the Baimskaya copper mining project. The large deposit — of a metal now in high demand for its use in renewable energy technologies — was discovered in Soviet days but lack of technology, equipment, and infrastructure delayed its development.

“The project is in the middle of nowhere. There is no electricity, no roads, no access,” said Oleg Novachuk, chief executive of Kaz Minerals, the miner in charge of the $12bn project, which is expected to start production by 2028. With the floating reactors, the project will have a power source at predictable costs for about 60 years.

Developing Chukotka along with the rest of the Arctic has long been a goal for Putin and Russia, which this week is hosting a plenary meeting of the Arctic Council, where the eight countries of the region are represented. “Russia should expand through the Arctic, as this is where it has its main mineral resources,” Putin said in 2017, when Russia first produced liquefied natural gas in the Arctic and exported it via the NSR.

NSR shipments have increased from 1.5m tonnes in 2000 to 33m tonnes last year, mainly of gas and oil. The volumes should reach 80m tonnes in 2024.

Rosatom expects the volume of all Russian exports going via the route to reach 110m tonnes in the next decade, while also attracting international transit, which it estimates will start around 2025 and reach at least 30m tonnes in 2030.

Rosatom believes the standstill in the Suez Canal this year, when trade was disrupted by a stranded container vessel, boosts its case for the NSR. It says the route is often shorter and so can be competitive despite the need to hire icebreakers to escort ships in winter.

For example, a trip from South Korea’s Busan to Rotterdam in the Netherlands would take 27 to 28 days via the NSR compared with 40 days via the Suez Canal, according to Rosatom. “Twelve days of difference, when you’re shipping cargo worth $1bn, is a sizeable figure,” said Kirill Komarov, first deputy head of Rosatom.

DP World, the United Arab Emirates logistics company and port operator, became the first international company to sign an NSR transit partnership agreement with Rosatom in July, pledging a $2bn investment in its infrastructure and additional fleet.

The coronavirus pandemic, which interrupted global supply chains, is also showing the need for more routes, said Sultan Ahmed bin Sulayem, chief executive of DP World. Managing efficient shipping all year round remains a challenge for Rosatom, although the overall climate change is playing a part. In the past 40 years, the Arctic ice cap has halved in the warmest month of September and by 10 per cent in the coldest month of March, according to the Arctic and Antarctic Research Institute. By mid-century, the institute expects ice levels to lose another two-thirds in the summer, and to halve in winter.

The warming ocean is expected to help cut shipment cost. Less ice means fewer icebreakers and faster journeys. Still, weather forecasting and safety in the winter ice remain an issue, especially in the NSR’s eastern leg. Ice covered the Arctic seas sooner than expected in November and trapped 24 ships. Rosatom’s Likhachev attributed the situation to an inaccurate weather forecast, an increased demand for the route and shifting shipping schedules due to the pandemic.

Meanwhile, the residents of Pevek are getting the rare sense of being part of a growing economy. “We came to a dark city. For the first couple of years life was fading out here, people were leaving and there were rumours the town would get closed,” said Pavel Rozhkov, an IT specialist who came from Moscow nine years ago. “Then came the news that they will build a floating nuclear plant . . . large investment has started flowing into the town, the town has started developing.”