Transportation Infrastructure of the Eurasian Arctic 

(by Arnfinn Jørgensen-Dahl)

Introduction

The role of shipping in the Arctic is determined by a number of factors essential among which are, of course, the availability of suitable cargoes of various kinds and the presence or absence of competing transportation alternatives. Transportation systems, however, are not static or unalterable quantities. What the most efficient and economical means of transport are today may not be so tomorrow, and what is the most efficient in one geographical arena or locality may not be so in another. The climatic conditions under which they have to operate make practically all kinds of transportation in the Arctic a more difficult and costly affair than in sub-Arctic latitudes.

Table 3.21 gives a picture of how goods and commodities are transported in Russia. Between 1995 and 2008 the volume of transported merchandise increased by 637 million tonnes, or by 7.2% in thirteen years. Of this, road transport accounted for 107 million tonnes, or 16.8% of the increase, railways for 276 million tonnes, or 43.3%, and pipelines for 284 million tonnes, or 44.6% of the increase.

Table 3.21:  Freight by Transport Mode (Russia)

(Million tonnes)

Source: Table adapted from Federal State Statistics Service, Russia, www.gks.ru/bgd/regl/

Shipping, on the other hand, carried in 2008 only half the volume it carried in 1995. However, if we look at the period between 2005 and 2008, the picture has changed somewhat. The increase in volume between 2005 and 2008 was 284 million tonnes, or 3.1%, of which transport by railways accounted for 12% of the increase, road transport by 73%, pipelines by 6.7 %, marine transport by 3.2% and inland waterways by 6% of the increase in freight volume. Table 3.22 tells us that the share of the freight volume of each transportation mode did not change much between 1995 and 2008, and that in Russia, as elsewhere, road transport dominate.

Table 3.22:  Transport Mode Share of Freights

Source: Calculated from data in table 3.22

In 2008 mineral products (oil and gas) accounted for 69.6% of the value of Russia’s export. Metals and precious stones (and articles thereof) made up another 13.3%.  In 2007 Russia exported 191 billion cubic meters of natural gas. Of this volume 147.53 billion m3 went to Europe, all of it by pipeline. Most of the gas was recovered from fields in the Arctic. Most of the rest, about 44 billion cubic metres of the exported natural gas went by pipeline to the Baltic States and the CIS states Ukraine, Belarus, Azerbaijan and Georgia¹ .

Table 3.23 below shows the crude oil exports in 2006-2007 by outlet. Among important new plans are those that will transport oil by pipelines to Murmansk and Varandey. This is illustrated in Appendix 2. If these plans are realized, the export of oil from the two ports will increase considerably.

Pipelines

Russia has a vast pipeline network which is operated by Transneft - a state monopoly. In 2008 the length of Russia’s pipeline network was 228,000 km of which 165,000 km are gas pipelines, 47,000 km oil pipelines, and 16,000 km oil products pipelines. In some scenarios the already existing available global pipeline capacity, combined with rises in the global LNG liquefaction capacity, is thought to lead to less than an optimal utilisation of inter-regional pipeline capacity from around 60 billion cubic metres in 2007 to close to 200 billion cubic metres in the period 2012-2015, or a drop in the utilisation rate from 88% to less than 75%² . How much of this underutilisation of capacity applies to Russia is not clear.

A number of new natural gas pipelines linking Russia with Europe and Asia are nevertheless planned or under construction. Gazprom plans to double the capacity of the Yamal-Europe II pipeline, which carries gas from Russia to Poland and Germany via Belarus, from 1 to 2 trillion cubic feet. The expansion is expected to be completed in 2010 at a cost of US $10 billion.

The South Stream Project has Gazprom and ENI as partners and plans to send gas for 560 miles under the Black Sea and then cross Bulgaria with one alternative going northwest and the other through Greece and Albania to link up with the Italian gas network. This project is expected to be completed in 2013.

The so-called Blue Stream connects Russia to Turkey and has been in operation since December 2002. The capacity of pipeline is being expanded.

The Nord Stream Pipeline (or North European Gas Pipeline) is planned to extend for 2000 miles from Russia to Finland and the United Kingdom via the Baltic Sea. The project is estimated to cost $11 billion, twice as much as originally planned. The pipeline will carry about 28 billion cubic metres in two parallel pipelines. In January 2010 the construction began on the compressor station which is the starting point for gas supplies via the Nord Stream

Pipeline. This is the last facility of the onshore section of the pipeline, and construction of the offshore section is slated to begin in the spring of 2010³ .

Natural Gas for China is another possible pipeline project that is on the drawing board⁴ . When Putin visited China in April 2009 he reportedly signed deals with China worth some $3.5 billion. Only a preliminary agreement was concluded that left open the crucial questions of price and the source of the gas supplies⁵ . The forecast drop in Russia’s GDP of 8% is in some considerable measure due to severely curtailed export of oil and gas which in the first two and half months of 2009 was 40% down on the corresponding period the year before⁶ .

Russia’s new energy strategy, adopted on 13 November 2009, calls for an increase in gas production from 664 billion cubic metres in 2008 to 885-940 billion cubic metres in 2030. Production in Northwest Russia will increase from 46 billion cubic metres in 2005 to 141 billion cubic metres in 2030, in large measure due to Shtokman. Gas exports are projected to increase from 241 billion cubic metres in 2008 to 349-368 billion cubic metres in 2030, most of it going to Asia⁷ .

Table 3.23:  Oil Export by Outlet

Source: US Energy Information Administration

Railways

The railway system is an important carrier of resources and merchandise. Russia has

86,000 km of railroad tracks. Of the 1.3 billion tonnes delivered by the state railways in 2008, 200 million tonnes or 18% were oil⁸ . Oil has until recently reached the sea ports of Arkhangelsk, Vitino, and Murmansk by rail from where it has been exported by sea. But it is at present not clear what the overall situation is in regard to shipments from the Arctic ports. According to one centrally placed Russian official, crude oil deliveries by rail to the port of Vitino in the White Sea and to Murmansk on the Barents Sea have stopped⁹ .

The transhipment facilities in the Kola area receive almost all their oil from smaller shuttle tankers sailing along the NSR. The only significant quantities of oil sent out of Russia by rail go to China (see Table 23 above). On present indications the role of railways in Arctic oil and gas transport would seem to be diminishing rather than increasing.

Inland Waterways

Russia has more than 100,000 kilometres of rivers that are regularly used for navigation and transportation of goods and merchandise. In 2008 151 million tonnes of cargo was transported on the inland waterways, including 3.7 million tonnes of oil products (see Table 22 above) which went to terminals at various ports along the NSR from where it was sent by shuttle tankers to transhipment facilities in the Kola area¹⁰ .

Rivers and canals are mostly used for delivering goods and supplies to the northern regions of Russia. The largest rivers in Siberia and the Far East are the Ob, Irtysh, Yenisei, Lena, and Amur rivers. All of these also serve the oil and gas industries. The river fleet consist of more than 30,000 ships with a total deadweight of more than 12 million tonnes. The average age is more than 25 years. According to the Transport Strategy–2030 the cargo volume on the inland waterways will reach 203 million tonnes in 2020 and 262 million tonnes in 2030, and some 97 new cargo ships are to be delivered to the river fleet during the period 2010 to 2015⁸ .

Shipping

How much oil will be transported in Arctic seas will depend on how much is produced from old fields, on how much new exploration will be done, and on the development of the Varandey terminal which has been designed to have a capacity of 12 million tonnes. The projection is that in the nearest future (2012-2015) annual volumes of oil to be exported westwards from Murmansk will not exceed 12 million tonnes. “The analysis of real oil transportation schemes in Northwest Russia leads to the conclusion that the many planned oil transhipment terminals…are hardly going to be implemented in the foreseeable future. They were abandoned long before the landslide of world oil prices”⁸ . The most important offshore transhipment facility is the Belokamenka in the Kola Bay which has the floating storage and offloading vessel Belokamenka as its main unit and which can handle some 12 million tonnes.

The Northern Maritime Corridor (NMC) and the coast of Northern Norway plays a potentially important part in the shipping activities of the Arctic, firstly because of Norwegian offshore oil and gas activities, secondly because of the suitability of Norway’s coastline and relatively sheltered fjords as sites for land and offshore transhipment facilities of Russian oil, and thirdly because of what might be found in unopened and unexplored areas of the Norwegian and Russian Barents Sea continental shelves in the future.

Several locations for oil transhipment facilities and terminals have been established and tried since 2002. Bøkfjord near Kirkenes and Sarnesfjord near North Cape were the first for which permission was given to carry out transhipment of oil from Russia. The latter continues as a transhipment site operated by Kirkenes Transit. In 2007 8 Ship-to-Ship (STS) operations that involved 424,782 tonnes of condensate took place, and in 2008 9 STS operations that yielded 501,319 tons of condensate.

The Kvalsund Municipitality in West Finnmark has had plans since at least 2006 of establishing a port for loading oil and to act as a service port for the oil and gas industry. The plans involve facilities that can load oil on to modern super tankers (VLCC). Similar plans concern Sørøya in Hammerfest and Hasvik Municipalities which envisage the construction of rock cavern storage facilities for oil and oil products and a terminal for transhipping oil from the Goliat Field in the Barents Sea and from the Russian Barentsregion⁸ .

In Norwegian waters of the Barents Sea, Statoil is the operator of Europe’s first export facility for liquefied natural gas (LNG). The Snøhvit Field is also the world’s northernmost facility of its kind and is located some 140 kilometres north of Hammerfest. It has no surface installations and the output is transported by pipeline to Melkøya outside Hammerfest where it is turned into LNG. A total of nine wells were to be drilled of which six were drilled during 2004-2005 and put on stream in 2007. Further wells are to be drilled and are due to begin production in 2014-2015. Much of the production is aimed for the US market and will thus be in competition with LNG from Shtokman when and if this field begin to produce¹¹ .

Another significant field is the Goliat Oil Field in the Barents Sea, some 85 kilometres northwest of Hammerfest. With about 174 million barrels of reserves and a life expectancy of 15 years, the reservoir is scheduled to begin production by 2013 with ENI as the operator.

Whilst the capacity of Russian Arctic oil and gas terminals have increased and should, according to plans, increase substantially by 2015, the actual volumes of oil and oil products shipped through these terminals have so far tended to be rather small, and has in some important cases decreased. In 2008 the terminals in Ob Bay, Varandey, Arkhangelsk, Vitino and Murmansk, with a combined capacity of 35.6 million tonnes, shipped 9.05 million tonnes of crude oil and oil products. In the year 2004 the same terminals shipped 11.45 million tonnes. In 2015 the capacity of these terminals is supposed to be 42.5 million tonnes. The total capacity in 2015 of all planned oil terminals in the Russian Arctic (and not only the five included above) is supposed to amount to 117.5 million tonnes⁸ . It is open question whether in 2015 there will be sufficient supply of oil to utilize fully or even substantially the projected capacity of these terminals.

In 2007 Russia exported around 4.4 million bbl/d (587,450 tonnes/d) of crude oil and more than 2 million bbl/d (267,022 tonnes/d) of oil products. Most of the Russian oil exports are routed via Transneft controlled pipelines. Some 7%, or 300,000 bbl/d (40 000 tonnes/d) of oil was shipped by sea or rail. Oil is delivered by rail to Murmansk where it is transhipped. In 2007 roughly 270,000 bbl/d (36 048 tonnes/d) of crude oil and products were shipped from the Murmansk area. The capacity of the terminal at Varandey has been expanded and will allow for increased shipments of oil from the northern parts of Timan-Pechora. Most of the oil transported by sea from Russia goes from the port of Primorsk in the Baltic Sea and the port of Novorossiysk in the Black Sea¹² .

The amount of oil transported by sea from terminals in the Russian Arctic, including the Barents Sea region, has increased substantially during the last decade. In 2002 some 4 million tonnes of oil was transported from terminals in the Russian Arctic along the coast of Norway to markets further south and west, in 2004 almost 12 million tonnes and then dropped in 2005 to 9.5 million tonnes only to increase to more than 11.5 million tonnes in 2008. The completion and opening of the new Varandey offshore terminal in 2008 was an important event. This terminal can on its own double the annual volumes of oil shipped for export through the Barents Sea. In a five to ten years perspective it is thought that exports of oil by ship from Russian Arctic terminals may reach 100 million tonnes a year⁸ .

From the point of view of maritime transport Russia is divided into three operational arenas or regions. There are the ports and harbours of the Northwest Region (including the Baltic Sea) which in 2008 handled 215 million tonnes of cargo, or 47% of the turnover; the Southern Basin (the Black Sea) ports which handled 150 million tonnes, or 35%, and the Far East Region ports which handled 80 million tonnes, or 18%.

Current plans stipulate that the capacity of Russian ports will increase by 454 million tonnes by 2015, thus doubling today’s capacity. The Russian controlled merchant marine consists of 1486 ships (89% under Russian flag) with a total deadweight of 17 million tonnes (36% under Russian flag). The federal transportation programme calls for an increase by 2015 to 22.6 million deadweight tonnes⁸ .

Russia’s biggest shipping company, Sovcomflot, is a leader in Arctic shipping and has the largest Arctic shuttle tanker fleet, and operates the largest ice-class LNG carrier fleet. It owns some 147 vessels amounting to 10.38 million dwt and has another 15 vessels on order which will add another 1.39 million dwt. The average age of the fleet is 7 years, and consists of 118 tankers, 8 specialized vessels, 8 LNG and LPG carriers, and 7 dry cargo vessels. During the summer of 2010 the company plans to start a pilot project carrying cargo east along the Northern Sea Route (NSR) to Japan¹³ .

The Russian icebreaker fleet consisted in 2008 of 28 icebreakers working in the Arctic, including 7 nuclear ones. The newest, named 50 Let Pobedy, was completed in 2007, is 159 meter long, 30 meter wide, is 3,500 tonnes deadweight, and is designed to break through 2.8 metres thick ice. The icebreakers are, of course, essential to the operation of the Northern Sea Route. Some projections envisage that the volume transported along the NSR will increase from 1.5 million tonnes in 2002 to 50 million tonnes in 2020⁸ .

Appendix: The Russian oil and gas network towards Europe 

Source: US Energy Information Administration

Arnfinn Jørgensen-Dahl, 2010, Transportation Infrastructure of the Eurasian Arctic, CHNL.©