NSR – Boom or Bust or

something in between?(Will the Arctic bubble burst? Economist Arctic Summit 2015)

High North Dialogue 2015

University of Nordland, Bodø, March 18

Felix H. Tschudi

Tschudi Shipping Company

Centre for High North logistics

TSCHUDI SHIPPING COMPANY

The Tschudi Group (www.tschudishipping.com)

with roots back to in 1883 is a shipping, offshore,

and logistics group. The Tschudi Group has

particular focus on the cargo flows in Northern

Europe specialising in east-west trades and projects

involving the Baltic, Russia and the Central Asian

republics including transportation and port

infrastructure in the High North.

The Kola Peninsula and Northern Norway

form an all-year ice free wedge into the Arctic

– a natural platform for serving logistics in

the Barents Sea and the remaining Arctic

Several Arctics which are difficult to manage

and develop with one set of rules

Europe/US

Joint regional solutions to joint regional challenges!

Storage in Murmansk

9 Days to the Bering Strait!

2010 - 4 passages 111 000 mt

2011 - 34 passages 821 000 mt

2012 - 46 passages 1 260 000 mt

2013 - 71 passages 1 350 000 mt

2014 - 53 passages but few full

transits with bulk cargoes

Serving a wide variety of vessels

and cargoes generating savings in

time, cost and emissions; large

tankers, bulkcarriers, LNG, reefer

and offshore vessels.

Turns a Freight Disadvantage

into an Advantage

What are the short term drivers determining the use of the

NSR? Dynamic picture but what really matters is usd per

ton delivered!• Main factor - the freight market level for different shipping segments

• Type of cargo – price differences in asian and western markets eg. LNG - time sensitivity of markets and cargoes

• Time required for passage - ice conditions and waiting time.

• Draft limitations determine the size of the vessels and tracks – ongoinghydrographic surveying

• Availability of ice class tonnage in different segments and sizes –- repositioningcost of vessels

• Cost elements: Bunker prices – slow steaming - Insurance - NSR Transitversus Suez canal tarifs. Workability and simplicity of transit fee system.

• Piracy threat – cost of insurance and protection – risk of non-delivery of cargo.

SUBJECT TO NO «ARCTIC REFREEZE” DUE TO POLITICAL OR CLIMATIC REASONS

Transport of oil, gas,

minerals and equipment by:

• Specialised shuttle

multipurpose vessels

• Shuttle tankers

• Shuttle LNG carriers

• Shuttle bulkers

• Purpose built offshore vessels

• Seasonal liner services

NP

In the medium term – regional destinational shipping serving the developments in Siberia and Alaska will be the most relevant activities. Suitable infrastructure is a pre-requisite.

Present:the Norilsk Nickel logistical operation involving 5

ice breaking 14 000 dwt multi-purpose container vessels

Future: ARCTIC CONTAINER SHIP – ICE CLASS ARC 8

Moscow

NorilskDUDINKA

MURMANSK

EUROPE

SOUTH-EAST ASIA

9

Destinational tanker shipping: The Varandey offshore terminal in

the Pechora Sea serving Lukoil controlled ice breaking crude oil

shuttle tankers.

Price: Usd 130 million per vessel

Year around service

Yamal LNG - LNG carrier new building

orders

INFRASTRUCTURE DEVELOPMENT AS CATALYST:

Kirkenes Industrial Logistics Area - KILA.1.000.000 m² area and 600 m deep water quays.

12

POTENTIAL USE:

Marine Transportation

and logistics including

offshore base activities.

Service providers for

the oil and offshore

industry.

Combined waste

incinerator and power

plant.

Industrial use

Handling and storage of equipment for the offshore

and mining industries. Equipment and products can

be shipped via the NSR from the Far East or from the

West. NSR shipping line during ice free season?

Infrastructure Examples: transhipment hubs Handling and storage of goods and equipment for import or

export to and from Norway, Finland, Sweden and Russia.

www.tschudishipping.comwww.tschudishipping.com

Ship to Ship transfer of oil and oil products

14

Tschudi Arctic Transit, has extensive experience in transshipment of Russian oil in northern

Norway. In 2014 transhipping around six million tons performing between 4-6 operations monthly

in Honningsvåg.

Infrastructure developments for bulk transhipment

The Tschudi Bulk Terminal in the ice free port Kirkenes facilitates vessels up to 100 000

dwt with a plan to increase this to 170 000 dwt.

Silo storage capacity of 370 000 m3 offers the possibility of storage and transshipment

of bulk minerals from Russia and northern Scandinavia both in direction the Atlantic and

the NSR

Russian Rivers combined with the NSR offer

logistical solutions for Siberia

Ob/Irtyish

Novosibirsk to Novy

Port

Yenisey

Krasnoyarsk to

Dudinka

Lena

Baikal to Tixi

The European High North: Where Gas meets Ore - A joint Nordic opportunity for technological and industrial development independent of geopolitics

Kirkenes, 4th October 2012 18

Fe

Ni

Al

Fish

Energy

Raw materials

Future:Today:

Consumables

Vision

Long term industrial developments based on infrastructure For increased mining on the Kola peninsula and in northern Finland and

Sweden the establishment of railway connections for transporting

rawmaterials in bulk is required. Such connections could serve direct

export via the NSR or processing and could facilitate the import of LNG in

tank wagons as energy to the nordic countries and Europe – a rolling

pipeline.

A «rolling» LNG pipeline into Finland and the

Baltics?

An illustration: One container

would be sufficient to cover the

daily energy demand of the

Sydvaranger iron ore mining and

processing operation

An LNG rail supply chain could

serve remote extractive

industries with cheap flexible

environmentally friendly energy

thereby creating the conditions

for value adding local industrial

processing.

ARCTIC RAILWAY ROVANIEMI-KIRKENES

www.arcticcorridor.fi

European and Nordic joint Challenges.

The Arctic offers possible solutions.

• Challenges: Europe consuming 20 per cent of world’s resources

and producing 3 per cent (described in the European

Commission’s Rawmaterials Strategy 2012). This weakness is

accentuated by the geopolitical development.

• Finland is searching for «new engines of growth»

• Norway faces «the end of the oil era» and needs to develop new

industrial value creation and jobs.

• Lack of infrastructure connecting the «European High North» to

Europe (the TEN-T plan does not extend beyond Helsinki,

Stockholm and Oslo)

The NSR has opened up for cross arctic developments. The

pace is determined by the climate, political will,

and most importantly, economics.

• NSR will open for resource development in the High North in general and

Siberia in particular. A transport disadvantage is turned into a transport

advantage.

• In the future the ice free ports of the Barents Region could serve resource

developments on the Scandinavian peninsula and in Siberia as transhipment

hubs. This development will require joint cross border infrastructure projects

such as investments in ports and railways.

• The Barents region but also the entire Arctic are regions “Where gas meets

ore” – future platforms for industrial development involving natural gas as an

industrial input factor. This opens for environmentally friendly cross border

value adding industrial processing and export of semi-processed products to

the Far East via the NSR.

ICE CONDITIONS WILL CONTINUE TO VARY AND SO WILL POLITICS.

PRESENT SANCTIONS AFFECTING THE ARCTIC ARE SPECIFIC AND THE

IMPACT MORE PSYCHOLOGICAL THAN REAL EXCEPT FROM THE

INDIRECT EFFECT OF THE FINANCIAL ONES.