Rules of the Arctic business game should not change for at least 20 years

12 april 2019 | Prime

The Russian Arctic is well-known for its natural resources, however, the long term of project implementation, huge financial costs, harsh climatic conditions, and logistics difficulties hamper the development of these resources. What should be done for attracting investments in the Arctic, why no sharp increase in transit along the Northern sea route is expected in coming years, and why the plan for the region development is needed to be done by 2035, these points were explained by the Head of the Analytical Center Vladislav Onishchenko during the International Arctic forum in an interview to the Prime Agency.

Vladislav Onishchenko
Vladislav Onishchenko

– According to the President Vladimir Putin, the program for the Arctic region development must be done in the same way as the Far East development program was, and that the government should encourage business to invest in the Arctic region. What measures are required for attracting the companies to the Arctic?

– Duration of the project implementation is a specific feature of the Arctic, unlike the Far East and other regions of Russia, so business needs long-term stable rules and work conditions. One may argue whether these conditions are attractive or not, but it is important for the companies to be able to make plans for 20 or even 40 years, otherwise Arctic projects are unachievable.

The majority of our projects in the North is now related to the extraction of natural resources, the usual period of implementation of a large field is approximately 30 years. In addition, it will take first 10 years to get first commercial shipments since the beginning of the implementation process.

As for the preferences – they may vary: tax preferences, special investment agreements, advanced development areas, special economic zones, and other tools. The example of NOVATEK demonstrates that this clearly can be achieved.

– Isn’t the cargo turnover of the Northern sea route reaching 80 million tons by 2024 too ambitious?

– NOVATEK alone makes 55 percent of our total goal. Besides that, we have Novoportovskoye field which already gives about 7-8 million tons of oil, 8-10 % of the required turnover. We also have Norilsk Nickel batches of rare earth metals, which is small in volume – 0.9 million tons, but significant in the cost. And meanwhile, an important indicator is not only the turnover, but also the cost of transported goods. You can carry sand back and forth along the Northern sea route, but no one needs it.

Taimyr coal can also contribute to the volume, it is 19 million tons per year with full production capacity. If there are buyers for it, the main profit will initially come from the Western direction because of the high-quality coal, low cost required for its production and shorter distance of the path. The East also looks attractive, but in future, not in the next few years.

– Have you assessed the process beyond 2024? To what degree the volume of cargo transportation on the NSR is expected to increase?

– We have already made the first versions of the model of financial and organizational work of the North Sea route as a part of the work on the comprehensive plan for the North Sea route and adjacent territories development. It strongly depends on the type of production to be implemented.

We are designing a model until 2035, which covers both the West and the East regular transport links. Our model is steadily increasing. Meanwhile, we consider the fact that about 50 % of cargo on the NSR should go to the East in the future.

Read More – "Prime"

See also:

11.04.2019 - NSR to Face Comprehensive Development