News review of the events on the NSR
#1 January 2020

1. NOVATEK orders gas tankers abroad

NOVATEK has received permission from Russian government to build 10 gas tankers with Arc7 ice class at foreign shipyards.

According to Head of NOVATEK, L. Mikhelson, the need for this arose in connection with the active development of projects for the production of liquefied natural gas (LNG), the export of the gas requires more ships than originally planned.

Previously NOVATEK ordered 15 vessels at the Russian shipbuilding complex “Zvezda”.

However, “Zvezda” can build 5 gas tankers a year and does not have time to hand over the required number of vessels by 2030.

Therefore, it became necessary to order additional vessels from foreign shipbuilders. As a result, NOVATEK orders 10 gas tankers at foreign shipyards, but the majority of the company’s fleet of gas carriers will be built at the Russian shipyard “Zvezda” (35-37 LNG tankers). NOVATEK would like to receive additional gas carriers in 2023-2024, when it is planned to launch two production trains of “Arctic LNG-2” plant.

This will avoid a repetition of the situation with Yamal LNG, when the early launch of production trains forced NOVATEK to ask shipowners to speed up the commissioning of high-class gas tankers capable of operating on the Northern Sea Route.

2. Russia allocated funds for construction of a new nuclear icebreaker   

The Russian government will allocate from the federal budget 127 billion rubles for the construction of the new generation nuclear icebreaker “Lider”. It is assumed that the money will be allocated within 8 years, with the expectation that the construction is completed in 2027. As follows from the government decree, the corporation Rosatom is the customer for the construction, and Atomflot is a builder.

The decision that the first icebreaker “Lider” will be built on budget money was made by President Putin. Completion of the technical project for “Lider” was announced last spring.

It is assumed that the icebreaker will provide navigation along the Northern Sea Route connecting ports of Northeast Asia and Northern Europe. Its capacity will be 120 MW. Construction will be launched at “Zvezda” shipyard in Primorskiy region, the RBC channel reports.

3. Cargo volume transshipped along the NSR reached 30 million tons

In 2019, the volume of cargo transshipped along the Northern Sea Route increased from 16.7 million tons to almost 30 million tons, exceeding the planned figures in November.

The main increase in cargo turnover was due to transportation of oil from the Novoportovskoye field and liquefied natural gas from the “Yamal LNG” plant.

“We have taken responsibility for the implementation of the national project “Northern Sea Route”, we are now moving beyond the annual transportation plans, and our strategic goal is to fulfill the dream of all Russian sailors – to achieve year-round use of the NSR, including the eastern direction,” – explained the Director General of Rosatom Alexei Likhachev.

By decree of President Vladimir Putin, the turnover is expected to grow to 80 million tons in 2024.

4. Pevek seaport reconstructed by the end of the year

The Pevek seaport reconstruction project is included in the Infrastructure development plan for the Northern Sea Route (NSR) until 2035. In addition, the plan includes the reconstruction of two airports on the Chukotka Peninsula.

Ministry of the Development of the Russian Far East announced the approval of the infrastructure development plan for the Northern Sea Route until 2035. The plan is based on the forecast of all existing and promising groups of cargo flows, it includes 84 events.

According to the plan, by December 2020, the reconstruction of facilities in the seaport of Pevek (Chukotka Autonomous Region) will be completed. Reconstruction of the airport complex of Pevek and the airport of Keperveyem is planned.

It also provides for the creation of Arctic integrated emergency rescue centers of the Russian Emergencies Ministry and equipping them with modern rescue equipment. The plan also includes the construction of special rescue vessels with high ice class and nuclear icebreakers “Lider”. Ministry for the Development of the Russian Far East and Rosatom will present the list of projects planned for implementation as part of the NSR development in May 2020.

5. Rosatom proposes to move to take-or-pay contracts for icebreaking assistance

Rosatom has prepared a draft of federal law; according to it, shippers will conclude take-or-pay contracts for icebreaking assistance along the Northern Sea Route. Thus, the state corporation wants to raise funds for the construction of universal nuclear icebreakers.

“In accordance with the current legislation of the Russian Federation, payment for icebreaking assistance along the NSR is based on the volume of services actually rendered, that makes it impossible to apply the take-or-pay principle and, as a result, does not allow attracting private investment in the construction of the nuclear icebreaker fleet,” says the materials for the project.

Rosatom proposes to extent the Code of Merchant Shipping of the Russian Federation with a new chapter, which provides for the establishment of special rules regarding the contract for the provision of icebreaking services and other services provided using icebreakers. Public discussion of the draft will last until February 7, reports TASS.

The take-or-pay principle or the Groningen principle is widespread when concluding gas supply contracts or other contracts, where significant investment in infrastructure requires. The supplier undertakes to provide goods or services up to the maximum volumes specified in the contract. The buyer agrees to pay a certain part of these volumes, regardless of how much he actually purchased during the period.

The construction of new icebreakers is a very expensive project and Rosatom expects that the use of the take-or-pay principle will help raise funds for the construction.