News review of the events on the NSR
#1 June 2019

In early June, St. Petersburg International Economic Forum was held. Several important agreements concerning the development of the infrastructure of the Arctic were signed during this event.

1. Agreement on comprehensive development of the Northern Sea Route

The infrastructure operator for the development of the Northern Sea Route the state corporation Rosatom, Russian Direct Investment Fund, the producer of palladium and nickel, Norilsk Nickel, and one of the world’s largest port operators, DP World, signed an agreement on joint implementation of the project for the comprehensive development of the Northern Sea Route.

The agreement is not legally binding and provides comprehensive work on the study of the most effective commercial options for the use of the Northern Sea Route. The parties will consider the possibility of creating a strategic partnership in the form of a joint venture for the development of transit cargo traffic via the NSR. The key objective of the project is to increase the volume of freight traffic along the NSR and the Arctic zone of the Russian Federation.

At the first stage, the participants will develop a strategy to increase the efficiency of the use of the NSR, to determine ways of developing transit traffic. In particular, it is about the development of linear transportation of containers and other commodity and raw cargoes along the Northern Sea Route. Also, the parties will assess the potential funding for the design and construction of an additional fleet of high ice class, icebreakers and port infrastructure.

The parties agreed to establish a joint working group to conduct an analysis and prepare a feasibility study for the project within six months.

2. Fiber optic line connects Europe and Asia via the Northern Sea Route

The Russian company MegaFon and the Finnish company Cinia Oy signed an agreement at the St. Petersburg Forum to establish an international consortium for the construction of an underwater high-speed optical line that will connect Helsinki and Tokyo.

The project involves the laying of the first transarctic fiber optic cable from Helsinki along the Arctic coast of Russia to Tokyo. Its length will be 10,000 km. The line will provide the optimal combination of the lowest signal delay and high network availability, as it will follow the most direct route from Europe to Asia, and the most advanced technological solutions will be applied when laying.

The international partners of the project, led by Cinia Oy, are Japanese and Scandinavian companies, as well as international financial organizations. Cinia Oy already has experience in implementing large-scale telecommunications projects, having previously laid a 1,200 km long underwater cable C-Lion1 between Germany and Finland. “The laying of the transarctic cable is part of the work to stimulate the socio-economic development of the Arctic region. The new communication line is an example of a high-tech solution for the development of the global economy, combined with the use of the highest environmental standards in construction. We are announcing a project that links together three continents, where about 85% of the world’s population lives,” said Cinia CEO Ari-Jussi Knaapila.

MegaFon also has experience in the construction and operation of high-speed fiber-optic networks. Their total length is more than 200 000 km.

3. NOVATEK invests more than 100 billion rubles in a shipyard near Murmansk

NOVATEK, the largest non-state gas producing company in Russia, will invest more than 100 billion rubles in building a shipyard in Belokamenka village of Murmansk region, and it will also create about 15,000 jobs in Murmansk region and take part in social projects related to medicine and education. This is about the construction of the Center for marine large-tonnage facilities, which will last until 2031.

This is stated in the cooperation agreement between NOVATEK and the government of Murmansk region, which was signed at St. Petersburg International Economic Forum.

“Murmansk region is becoming one of the main regions of the company’s development strategy,” Leonid Mikhelson, the head of NOVATEK, said during the signing ceremony.

4. Shell and Gazprom Neft Produce Together Oil and Gas on Yamal

Gazprom Neft and Shell signed an agreement on joint participation in a major oil and gas project. As part of the agreement, five hydrocarbon sections will be developed in Yamalo-Nenets Autonomous District. The size of production will be 250 million tons of oil and 200 billion cubic meters of gas. Their cost, according to preliminary estimates, should reach $ 2 billion.

This agreement could be the largest for Shell after the imposition of sanctions in 2014. It is assumed that the production will take place at Meretoyakhinskiy field, Tazovskiy, Severo-Samburgskiy and two Zapadno-Yubileinyy sectors in Yamal. These fields have complex geology and Gazprom Neft will seek tax remissions for them. If Russian government takes this step, it will significantly increase the evaluation of the project.

The deadlines for implementing projects are not officially announced, but Gazprom Neft previously announced plans for production at Tazovskiy field in 2020. Every year, 2.1 million tons can be produced at this field. It clarifies that the sanctions imposed by the US and the EU on oil production in the Arctic, do not apply to these fields.

5. Bulk cargo terminal in Murmansk region

A specialized bulk cargo terminal with an annual capacity of up to 4 million tons of mineral fertilizers will be built on the western shore of the Kola Bay. The investment project intends to implement JSC “Infotech Baltika”. The project partner is PhosAgro, one of the main fertilizer producers in Russia. During the Forum, a relevant memorandum on cooperation between PhosAgro and Infotech Baltika was signed.

“The creation of the terminal will allow diversifying transport logistics and making export deliveries of mineral fertilizers more efficient,” said Alexander Muller, director of Infotech Baltika Company.

The design of the terminal is scheduled to begin in the summer of 2019, commissioning – in I quarter of 2023. This is due to the plans of PhosAgro to increase the production of fertilizers and feed phosphates from 9 million tons to 11.5 million tons. They will be delivered through the Murmansk terminal to the markets of 100 countries of the world.

“The project of Infotech Baltika, implemented at the mouth of the Lavna River, in our opinion, is one of the most promising. We expect that it will help provide PhosAgro with necessary transshipment capacity by optimizing transportation costs, ” said Andrey Guriev, CEO of PhosAgro.

It should be noted that Infotech Baltika already has experience of successful implementation of investment projects in Murmansk region. It established “RPK Nord” terminal in 2016, consisting of the storage tanker “Umba”, which is the largest oil terminal in the Kola Bay. It serves the transshipment of Arctic oil of “Gazprom Neft”.

6. Norwegian production of ship components will be localized in Russia

A Norwegian-Russian business forum for the development of civil shipbuilding cooperation was held in Norwegian city Alesund. The parties agreed to form a Roadmap on the localization of the Norwegian production of ship component equipment in Russia. Within the framework of this Roadmap, various measures of business support will be provided from both Norway and Russia. Another burning issue is the questions that Norwegian companies have when they are certified by the Russian Maritime Register of Shipping. Participants agreed to prepare a list and analyze it.

In addition, the parties considered the possibility of exchanging students between relevant universities and agreed to hold a videoconference, which will consider the goals and objectives of Russia and Norway.