The target indicator of the NSR loading has been fulfilled by less than half, transit has practically ceased, and large projects capable of ensuring growth in transportation volumes are postponed.
The issue of development of the Arctic regions and the Northern Sea Route (NSR) became the subject of discussion at the anniversary, 10th conference The Far East and the Arctic: Sustainable Development, which took place at the end of last week in Moscow.
The Arctic Century previously commented on the key issues in regard to resource economy of the Arctic and has provided the assessment of the hydrocarbon and oil industry in the north, the status of reserves—Cost-effective Development of Arctic Resources: Expectations & Reality.
The head of the Federal State Budgetary Institution Glavsevmorput, Sergey Zybko, happily shared the results of the past year: growing cargo turnover, passage of deep-draft vessels, and improvement of ice routes. However, his speech was met with mixed reactions: the moderator of the plenary session, the head and co-owner of the consulting company Gekon, Mikhail Grigoriev, called on the conference participants "not to delude themselves", since the plans for loading the NSR have been fulfilled less than half and are currently provided by only two companies—Novatek and Gazprom Neft. He added:
The rest is flat as a pancake, and stands at the same levels.
According to Sergei Zybko, in 2024, the Federal State Budgetary Institution Glavsevmorput issued 1,312 permits against 1,264 the year before and carried out 976 icebreaker transportations, increasing this figure by 20%. The transit amounted to 3 million tonnes. The department considers transit to be the route by which the vessel enters and leaves the northern section.
During the summer navigation from St. Petersburg to Qingdao, China, the largest non-ice-class container ship in the history of transportation along the NSR managed to pass through. “It passed absolutely safely; there was ice on the road [on the NSR section], but with the help of the issued route, the container ship simply flew by,” Zybko rejoices. According to the head of Glavsevmorput, the vessel covered 2,500 miles (4,023.3 km) in 5 days 21 hours at a speed of 15.5 knots (28.7 km/h).
We are talking about the Flying Fish 1 vessel, 294.04 metres long and 32.2 metres wide, which flies the Panamanian flag. In September 2024, it crossed the Northern Sea Route border near Mys Zhelaniya (Novaya Zemlya archipelago) and left the route's waters near Mys Dezhnev (Chukotka Peninsula). "This is a very good example: it draws the attention of other shipping participants to the fact that there is an NSR and that, if properly deployed, it is possible to navigate along it," Zybko said, noting that Rosatom conducts regular hydrographic studies of northern waters in order to avoid the risk of running the vessel aground.
Two bulk carriers with a cargo of 164.5 thousand tonnes of iron ore concentrate and a draft of 17.5 metres also travelled along the NSR from Murmansk to China, although the depth of a vessel's immersion in water on northern routes usually does not exceed 12 metres. Such vessels have never passed through this section, Zybko noted. The cargo flow on the NSR in 2024 reached 37.9 million tonnes—5% more than the year before, an absolute record. In Soviet times, the cargo transportation figure on this route did not exceed 9 million tonnes.
However, Mikhail Grigoriev from Gekon was not impressed by the achievements of Glavsevmorput. “Transit is a passage between ports of foreign countries, bypassing the ports of the Russian Federation. Until 2022, ships went from east to west (from Canada to Finland) and from west to east (from Canada to Japan) through the eastern passage. This was transit. And now there are only export deliveries of products from the ports of the Baltic Sea, Murmansk, and Arkhangelsk,” the conference moderator said.
He also recalled that, according to the government plan, the cargo flow on the NSR in 2024 should be twice as much as the current one—at 90.1 million tonnes.
"The development of the Northern Sea Route is currently associated with only two projects, don't be fooled! These are Novatek and Gazprom Neft. The cargo flow is provided by the export of their products plus the transportation of supply cargo. Yes, these are two brilliantly executed projects, but they are not enough," Grigoriev said. In other words, if one were to subtract the volume that falls to Novatek and Gazprom Neft, the volume of transportation along the NSR is comparable to what it was in the USSR.
In fact, the Northern Sea Route is currently used to transport mainly oil and liquefied natural gas. Novatek accounted for 24.3 million tonnes of NSR cargo turnover last year. Other projects from the 2022 government decree remain on paper for now.
The implementation of the Baimsky Mining and Processing Plant project at the Peschanka deposit in Chukotka is being delayed. Peschanka is one of the largest deposits in the world, containing more than 23 million tonnes of copper and about 2 thousand tonnes of gold, as well as molybdenum.
The project is being carried out by Baimskaya Holding LLC, 99% owned by the closed-end mutual investment fund Severnaya Aurora, which acquired a stake in May last year. Another 1% is owned by Baimskaya Management Company LLC, which is implementing the mining and processing plant construction project; the CEO is Georgy Fotin. Previously, he headed a company from the perimeter of Kazakhstan's KAZ Minerals. The latter, in 2018, was sold to Aristus Holdings, a joint company of Roman Abramovich and Alexander Abramov, for $900 million. The beneficiaries of KAZ Minerals at that time were Kazakhstani billionaires Vladimir Kim and Oleg Novachuk.
But the Kazakhstani company encountered difficulties in servicing a debt of 1.78 billion rubles ($21.36 million) to VTB, which fell under tough anti-Russian sanctions, and was forced to resell the business to Trianon Ltd. in 2023. And when Baimskaya Holding was added to the US sanctions list in the spring of 2024, the project changed owners again. Now it is the Severnaya Aurora investment fund.
Last summer, Georgy Fotin spoke at the St. Petersburg International Economic Forum about the intention to “build one of the largest and most modern factories in the world”—a mining and processing plant with a processing capacity of 70 million tonnes of ore per year, capable of producing 1.5 million tonnes of copper and molybdenum concentrate. "This will be a fully digital production with unmanned quarry equipment. The latest technological solutions will allow us to work in difficult northern conditions with a competitive cost price," he explained. The head of the company said at the time that the amount of transported cargo will be higher:
We will transport about two million tonnes of cargo along the NSR, for which we are creating infrastructure from scratch.
They were talking about a 420-kilometre all-season road and a new port terminal on Cape Naglyoyngyn of the Chaun Bay. Funds for this were allocated from the federal budget. The Baimsky project also assumed a unique external energy supply scheme: the construction of four floating nuclear power units with a capacity of 110 MW each.
However, it was at this stage that a hitch arose. According to Mikhail Grigoriev, the creation of floating nuclear power plants has been postponed. "At the end of June, due to sanctions, China's Wison refused to cooperate on the Arctic LNG 2 project and build foundations for Rosatom's floating power units," he explains. It is not yet known whether the corporation has found a solution to this problem.
It is noteworthy that just a few days before this, at the SPIEF-2024, Andrey Nikipelov, Deputy Director General of the state corporation in charge of mechanical engineering, assured that the work was underway, and the holding was not experiencing "any problems with either equipment or hulls."
Theoretically, hulls for floating power units could be manufactured in Russia, but due to the increased workload on domestic shipyards, this is difficult to do. The Baltic Shipyard, which is capable of building civilian vessels with a nuclear power plant, is engaged in nuclear icebreakers. It is for this reason that Atomenergomash (part of Rosatom) held a tender in 2021 among Asian companies to create hulls for floating power units.
The leading contractor for Kazakhstan's KAZ Minerals is China's NFC. In 2022, the two companies signed an agreement to build a processing plant at the Baimskaya deposit. Under the $6 billion contract, NFC was responsible for building the processing plant itself, supporting infrastructure, and installing equipment.
The Baimskaya copper-porphyry area is one of the largest in the world. 12 promising copper deposits, as well as gold and silver, have been identified here. The project became possible due to the emergence of new technologies and the introduction of preferential regimes for it.
Georgy Fotin explains the need to attract foreign contractors by the lack of necessary technologies for ore processing. According to him, it is for this reason that the Peschanka deposit, discovered back in 1972, was not developed. There is no information on whether NFC is currently ready to fulfill its obligations under the contract. Representatives of UK Baimskaya do not want to talk about the current state of the project.
The cost of the Baimsky project is estimated at 1 trillion rubles ($12 billion), of which 200 billion had been invested by the summer of 2024. In mid-December last year, Baimskaya Holding placed its debut bond issue for 500 million rubles ($6 million) on the St. Petersburg Currency Exchange as part of a general programme for issuing securities for 50 billion.
And at the end of the year, on December 30, the supervisory board of VEB.RF approved the bank's participation in financing the construction of the Baimsky GOK, but the amount of investment, terms, cost, and conditions were not named.
According to a report from VEB.RF, the commissioning of the first stage of the Baimsky GOK with a capacity of 35 million tonnes of ore per year is scheduled for 2029, the second stage of the same capacity— for 2030. And although there is still time, the delivery of the first barge for the power unit to Russia, according to a report from Atomenergomash, was planned for 2023. At present, Atomenergomash and VEB are refusing to comment on the situation.
A Rosatom representative did not respond to the questions posed by Monocle about the fate of the four floating power units, citing the tight deadlines for preparing a comment, but noted that the corporation is already operating the world's only floating nuclear power plant, located on the basis of the floating power unit Akademik Lomonosov in the port of Pevek in Chukotka.
According to the source of Monocle, none of the floating power plant hulls ever made it to Russia.
Source: Monocle
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