Logistics challenges on the Northern Sea Route

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1 Business Seminar on Sustainable Use of Northern Sea Route November 7-10, 2014 Tokyo and Sapporo Logistics challenges on the Northern Sea Route Mr. Sergey Balmasov CHNL s NSR Information Office. Murmansk, Russia. sergey@chnl.no

2 NSR GEOGRAPHICAL LIMITS Polar night in winter period Presence of ice Remoteness. Long distances and lack of infrastructure.

3 What are the main driving forces for the NSR development?

4 1. NATURAL RESOURCES Polar night in winter period Presence of ice Coal Gold Oil and gas platinum nickel Oil and gas Remoteness. Long distances and lack of infrastructure. Coal

5 2. NSR AS IMPORTANT ELEMENT OF RUSSIAN NATIONAL & INTERNATIONAL TRANSPORT SYSTEM

6 OIL & GAS PROJECTS Barents & Pechora seas Polar night in winter period Seismic study: 355 thousand km 51 offshore wells Laptev sea Seismic study: 17 thousand km 0 offshore wells Presence of ice East-Siberian & Chukchi seas Seismic study: 14,5 thousand km 0 offshore wells Kara sea Seismic study: 83 thousand km 13 offshore wells Remoteness. Long distances and lack of infrastructure.

7 OIL & GAS PROJECTS Polar night in winter period Presence of ice

8 Few tips for foreign ship-owners working on Russian offshore projects.

9 PLEASE PAY ATTENTION TO: Geographic working area Where exactly the vessel is planned to operate: Inside Russian territorial sea Within Russian exclusive economic zone International waters Crossing different zones Different sea areas have different immigration and customs regimes.

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11 PLEASE PAY ATTENTION TO: Vessel s customs status Customs regime, applied for vessel when entering Russian waters: Simplified procedure (clearance using General Declaration) Temporary importation (monthly fees + guarantee payment) Special customs procedure (no fees) Other Consultation with the customs broker will be very useful, customs status will influence to all vessel s activities.

12 PLEASE PAY ATTENTION TO: Bunkering options Inform your local bunker supplier about following aspects: Main purpose of port call (any cargo to be loaded or discharged) Bunker for own use or to be delivered to other vessels Other details about planned vessel s activities Bunker price can be with or without export fees and depends on above information and vessel s customs regime.

13 PLEASE PAY ATTENTION TO: Spare parts and provision When planning supplies from abroad, please consider vessel s customs status. Please note, offshore reefer containers are not readily available in Russia.?

14 PLEASE PAY ATTENTION TO: Crew change Crew change in remote areas with poor transport infrastructure requires preliminary planning and coordination with local Agent. In many cases usage of chartered helicopters is the only option. Getting Russian visa may take sometime, so it is better to get visas in advance.

15 NAVIGATION SAFETY Tanker "Nordvik" Keep track on NSR Administration safety notices The captain of the vessel in violation of the Permit s requirements entered the water with medium ice conditions, where the vessel s ballast tank was damaged

16 Key factors influencing the development of the NSR as an alternative transit route between Europe and Asia. Internal factors: External factors a) Tariff system a) Cargo base b) Ice conditions & long-term ice forecast b) Freight markets c) Availability of needed infrastructure c) Geopolitics d) Legislation d) Fuel prices e) Administration e) Large ice class vessels

17 NSR OPERATIONAL CONDITIONS Polar night in winter period Presence of ice Flat costal surface. Remoteness. Long distances and lack of infrastructure. Often fogs in summer period.

18 Port infrastructure needs to be developed PORTS ALONG NSR

19 PORTS ALONG NSR Polar night in winter period Presence of ice Remoteness. Long distances and lack of infrastructure.

20 PORTS ALONG NSR Polar night in winter period Presence of ice Remoteness. Long distances and lack of infrastructure.

21 TARIFFS

22 NSR 7 ZONES

23 Ice class No Ice1 (1D) Ice2 (1C) Ice3 (1B) Arc4 (1A) Arc5 (1A Super) Arc6 Arc7 Arc8 Arc9 Admittance criteria for navigation in the NSR according to ice class Ice navigation mode IN IS IN IS IN IS IN IS IN IS IN IS IN IS IN IS IN IS IN IS The Kara Sea The Laptev Sea East-Siberian Sea West East West East West East Chukchi Sea S M L S M L S M L S M L S M L S M L S M L IN Independent navigation, IS with icebreaker support S severe ice conditions, M moderate, L Easy Source: Atomflot

24 CONCLUSIONS 1. Simplified administrative procedures: smooth application processing, no need for vessel s physical inspection. 2. Flexible ice-class admittance criteria for ships to enter the NSR. Large size cargo ships with 1B, 1C ice class can do NSR transit in Easy ice conditions. 3. No mandatory icebreaker support for all vessels. (the need for icebreaker services is indicated in the Permit). It is possible to operate independently in Western part of the NSR (Kara Sea) in summer-autumn period. 4. Fees for icebreaker support is determined based on vessel s GRT, ice-class, distance, and navigation period. Distance (number of zones) is unpredictable element) 5. Simplified definition for ice conditions (L-M-S Light-Moderate-Sever) does not work in October-November.

25 Thank you