Arctic Ice Melt Opens up New Trade Routes

28 November 2012

As the ice caps continue to shrink, Arctic trade routes remain open for longer periods of time. While environmentalists worry about the causes and negative impacts of global warming - as well as about the effects of new accessibility to the Arctic's resources - shipping and energy companies are increasingly optimistic about the potential that these new routes hold. This year, a tanker is crossing the Arctic even during the winter season for the first time.

The Northern Sea Route was first opened to international shipping in 2005. To complete the passage, however, ships must be escorted by icebreakers. The current season has already seen the passage of 46 vessels. Previous years registered less traffic, four ships in 2010 and 34 in 2011.

The US National Snow and Ice Data Centre found this past August that the Arctic ice mass fell to 5.09 million square kilometres, a record level. The average mass between 1979 and 2000 was twice that amount. This leads to the Arctic being navigable for about two months out of the year when a decade ago it was open for only a few weeks.

A tanker transporting 134,738 cubic meters of liquefied natural gas (LNG), has been making headlines as it recently set sail from Hammerfest, Norway, towards Tobata, Japan. The trip is ground-braking in that it is the first to use the Northern Sea Route during the winter months. The route is estimated to save 20 days, or about half the journey time, that it would normally take to reach Japan from Norway via the Suez Canal. Felix H. Tschudi, Chair of Norway-based Tschudi Shipping noted that, "If a cargo ship with a maximum load capacity of 40,000 tons can pass through the Northern Sea Route, that will shorten the journey by 22 days and cost US$839,000 less than going through the Suez Canal." In addition, it would save about 1,000 tonnes of fuel.

Although the Northern route offers potential to shipping companies, it is in early stages of development. It still takes about a year to plan such a journey, and there are no weather guarantees on a year-to-year basis. In addition, there are very few ports along the route for use in emergencies, which increases insurance rates. Finally, the approximate US$400,000 cost of an icebreaker escort must also be factored in.

According to Gunnar Sander of the Norwegian Polar Institute, the resources in the Arctic are currently a bigger driver of human activity in the region than the shipping lanes. As he points out, "19,000 ships went through the Suez Canal last year; around 40 went through the Northern Sea Route. There's a huge difference."

ICTSD reporting: "Shipping developers eye up route through melting Arctic," FRANCE 24, 26 August 2012; "Gas tanker Ob River attempts first winter Arctic crossing," BBC, 26 November 2012; "Melting Arctic may lure investors but is development economically viable,?" ALASKA DIGEST, 2 November 2012; "Novatek pact to break Arctic ice," UPSTREAM, 12 November 2012; "Record number of vessels pass through the Northern Sea Route in 2012," OIL AND GAS EURASIA, 26 November 2012.

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