PORT PLANNING, DESIGN AND CONSTRUCTION PORT PLANNING, DESIGN AND CONSTRUCTION

CHALLENGES IN ARCTIC PORT DEVELOPMENT CAN SABETTA BECOME A MULTIFUNCTIONAL PORT?

Daria Gritsenko, Postdoctoral Researcher, University of Helsinki, Finland

Sabetta is of one of the most ambitious suggest that LNG will be a part of the deliver LNG to the Asian markets through contemporary Arctic seaport projects ever energy mix for years to come and that the conventional Suez Canal route via the developed. The port is constructed on the there is place for Arctic LNG on the market. Zeebrugge LNG terminals. western shore of the Ob estuary in the Yet, the success of projects like Yamal LNG Given that the Yamal LNG planned and is a key component of largely depends on the reliability of LNG capacity of 16.5 million tonnes annually, Yamal LNG project which includes a large transport for customers, thus, existence and 10.9 million tonnes have already been liquefied natural gas (LNG) plant capable of of a well-functioning modern port is a sold, there is little doubt that Sabetta will producing 16.5 million tons of LNG per year necessary condition. be an operational LNG terminal. Moreover, (compare: the Snøhvit LNG in the Barent The Arctic region poses significant Daewoo Shipbuilding & Marine Engineering Sea has production capacity of 4,3 million challenges to LNG logistics due to the were contracted to build sixteen ice-class mt per year), an international airport and a harsh operational conditions and large Arc7 gas carriers for the Yamal LNG project. settlement. Sabetta port is a joint venture costs associated with Arctic operations Yet, the real question is, can Sabetta make between - a large producer of (icebreaking and ice management, the move to become a multifunctional natural gas - and the Russian government. pilotage, insurance). In case of Yamal port? LNG, the challenges of Arctic navigation A PORT FOR ARCTIC LNG TRANSPORT will make LNG logistics seasonal. During SABETTA WITHIN THE SYSTEM OF Sabetta can be considered a ‘critical the summer season, LNG produced in RUSSIAN ARCTIC PORTS case’ in the ongoing industrialisation the Yamal plant will be exported to the Sabetta was initially conceived as a of the Arctic. The absence of adequate Asia-Pacific markets (China, , specialised LNG port; but early in the onshore infrastructure, primarily Japan, India) via the Eastern part of the planning stage, the public partners ports and terminals, is an obstacle to NSR using the special ice strengthened emphasised benefits that could be furthering prospects of the Arctic energy LNG-carriers. During the winter season, gained from developing Sabetta as a development. Many energy analysts the Western part of the NSR will be used to multifunctional deep-water port and a

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Port 2010 2011 2013 Dikson 0 0 29,2 Dudinka 1092 1102 970 Igarka 0 2,5 n/a Pevek 141,9 189 232,0 Provideniya 26,8 22,5 21.3 Tiksi 40,3 55,5 327,1 32809 25687 31406 Source: Botnaryuk, 2013.

Table 1. Port turnover in NSR ports and Murmansk (thousand tons) Botnaryuk, MB (2013). Analysis and Perspective of the Northern Sea Way Development. URL: http://cyberleninka.ru/article/n/analiz- sostoyaniya-i-perspektivy-razvitiya-severnogo-morskogo-puti.

new logistical node at the Northern Sea and a control station. These plans will allow facilities are in private ownership. Route (NSR). Increasing exploitation of Sabetta to receive larger vessels (eleven Potentially, this could lead to conflicts over the NSR, in particular as a short-cut for meter berth), including large gas carriers. financial maintenance. transcontinental transit, is among the While the port’s physical location is Initially, Sabetta was estimated to cost highest political priorities in and promising for developing infrastructure, approximately 73.3 billion RUB (USD $2.3 is included in both the state’s Arctic and inland connections remain poor. Currently, billion). As the port was envisioned as a Maritime development strategies. there is no railway link for Sabetta - a 180 joint venture, the RF federal government However, researchers are sceptical km railway connecting line to Bovanenkovo was supposed to finance a share of 47.3 regarding the attractiveness of the NSR for (an extension of the existing railway billion RUB ($795 million). In the summer international transiting, drawing attention further to Labytnangi) was envisioned, of 2014, the total cost of the Sabetta port to the fact that the distance is not the but construction did not commence due increased due to extensive dredging works, only economic determinant of maritime to estimated costs being too high. This and the project deficit of 22.3 billion RUB transport. Regulatory requirements of absence of railways cuts Sabetta off the ($375 million) increased the share of public the Polar Code are needed for icebreaker projected hinterland, but the dilemma finance required for project completion assistance. There are also risks and is that construction and maintenance of to 69.6 billion RUB ($1.2 billion). This uncertainties connected to Arctic shipping railways in the High North is very expensive. forced the federal government to cover because of additional costs and high Sabetta is located in the estuary the deficit by cutting funding to other insurance fees. To date, most of the NSR of the Ob River, which means that federal transport projects. It is difficult to transport is destination-to-destination, the inland waterway connections are assess the cost of port operations in the complemented by a limited number of available. Despite this, the navigational changing environment and it is not clear at export bulk voyages. season at the Ob River lasts only around what point the federal government will be The overall low level of shipments along four months and the Russian inland ready to pick up the cheque for occasional the NSR results in low turnover rates in the waterways fleet is outdated. This means cost overruns. The private partners, in Arctic ports. Strictly speaking, among the that significant investment is required their role, cannot be expected to invest nineteen Northern ports in the Russian to restore and maintain this connection. more than what is in line with their core Federation, only nine (including Sabetta) The development of adequate inland business, which is hydrocarbons. Thus, are NSR ports. Table 1 shows that freight infrastructure connections to provide port multi-functionality of Sabetta is also in part turnover in the NSR ports has been very hinterland is crucial to allow diversification a financial challenge. low in the past decade, with the exception of port activity. Basically, until Sabetta of Dudinka, which is a port utilised by becomes accessible in a reliable and cost CLIMATE CHALLENGES Norilsk Nikel for their shipments. From all efficient manner, it will not become a The impact of climate change on the Northern ports, only Murmansk, which is multifunctional port. development of Arctic ports remains not located within the NSR, has a significant unpredictable. First, there are uncertainties turnover and positive dynamics, ranking FINANCIAL CHALLENGES surrounding the Arctic Ocean and whether #2 after the Big Port of St. Petersburg Arctic ports require large capital climate change will make navigation easier, in the Russian North-West region. In investments that are unlikely to be repaid or more difficult. Due to the melting of what follows, we will present the three in the short or medium run. Thus, a sea ice, the amount of drifting ice that challenges that face Sabetta if it desires to close cooperation between public and is potentially hazardous to shipping is become a multifunctional port. private sector is required to finance and expected to increase. Climate change maintain such projects. In Sabetta, the is also associated with the increasing LOCATIONAL CHALLENGES port authorities maintain infrastructure unpredictability of weather conditions and Located at 71° North and 72° East, Sabetta (terminals, peers, cranes, etc.), provide heavy winds/storms, which may make the is equally well positioned to serve trade navigational safety, and maintain the port Arctic less, rather than more, navigable. flows to/from Europe, America and Asia. state control. Coastal Search and Rescue In truth, it is not quite clear how climate According to the initial plan, the port area (SAR) operations and oil spill response change will affect conditions for Arctic will cover fifty-nine hectares onshore, a fifty are organised by Rosmorrechflot, a unit shipping. Thus, the prospect that common kilometer sea channel, and a six kilometer of the Ministry of Transport of the Russian open-water ships, containing the vast long by 420 meter wide approach channel. Federation, through the Marine Operations majority of the world’s fleet, will enter The port also intends to have a four Headquarters. All transport objects, the Arctic Ocean – and call at Arctic ports kilometer long canal for storage of ships, terminals, storage and administrative - remains speculative.

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ABOUT THE AUTHOR

Daria Gritsenko holds a PhD in the Social Sciences from the University of Helsinki. She is a postdoctoral fellow at the Aleksanteri Insti tute (University of Helsinki) and a partner at the Finnish Centre of Excellence “Choices of Russian Modernizati on”. Dr. Gritsenko specialises in public policy with a focus on private governance, corporate social responsibility and the transformati on of socio-technical systems, including mariti me transportati on and energy infrastructure. Daria was assisted in the research of this paper by Elena Efi mova. Elena is a Professor in the Department of World Economics at St. Petersburg State University. Her experti se is in the fi eld of mariti me transport and logisti cs.

ABOUT THE ORGANISATION

The University of Helsinki carries out research of an internati onally high standard. Research funding, honours and prizes awarded to the Universiti es’ researchers are an indicati on of the wide- Second, due to increased seasonal THE FUTURE OF SABETTA spread esteem among the global scienti fi c variability and thawing of permafrost At the moment, Sabett a's multi - community. The University of Helsinki has caused by the increase in global functi onality seems like a complex regularly been ranked among Europe’s temperatures, building on Arcti c soil problem: cargo cannot be delivered 10 to 15 best universiti es on worldwide poses certain engineering challenges. without inland infrastructure, but it also ranking lists of research universiti es. The This means that port infrastructure will requires adequate shipping capacity, which Centre of Excellence”Choices of Russian need to be robust to contend with the at the moment is lacking. A multi functi onal Modernizati on” is administered by a upcoming changes. Moreover, the extreme port in Yamal peninsula and related inland board convening several ti mes a year. The climati c conditi ons also limit the use of infrastructure are only needed in case the administrati ve core is formed by director road transport and inland waterways, will provide a cost- Markku Kivinen, vice-director Tuomas and the thawing permafrost may result in eff ecti ve opti on for export and import Forsberg and research coordinator Sari additi onal challenges for the maintenance of various cargo, including dry and liquid Auti o-Sarasmo. The CoE’s scienti fi c plan is of roads and railroads. As a result, climate bulk, containers and general cargo, which monitored by the Internati onal Advisory change may cause less shipping, or more currently is not the case. New soluti ons Board and the Scienti fi c Advisory Board. risks in shipping, and decrease accessibility in terms of engineering and business of the Arcti c ports from outside the region. models will be required if Sabett a is ever ENQUIRIES This will make it unlikely that the trade to take the step from LNG terminal to patt ern will be diversifi ed and port will multi functi onal port. [email protected] become multi functi onal.

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