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Ships intrude on Arctic's warming waters

As the polar ice cap shrinks, new sea lanes open up, creating economic opportunity.

March 10, 2008|Hugo Miller | Bloomberg News

Norilsk Nickel is building its own fleet of ships to capitalize on the melting of the polar ice caps.

The company ordered five reinforced cargo vessels that can plow through the waters north of Siberia as new sea routes open. Moscow-based Norilsk, the world's biggest producer of nickel, is spending at least $467 million to buy reinforced vessels rather than rent both freighters and icebreaker escorts.

The thawing sea "has enormous economic implications, and commerce is going to push this ecological zone to the limit," said Rear Adm. Timothy McGee, head of the U.S. Navy's Meteorology and Oceanography Command.

Global warming, while threatening environmental disasters, is creating economic opportunity for ship owners, makers of ocean cargo vessels and tour operators. New routes may expand access to the world's second-biggest oil supply, deliver U.S. wheat to Asia 30% faster and increase Arctic tourism as much as 50% in a decade.

Ice shrinkage may enable ships to sail straight over the top of the world, cutting an 11,000-mile trip to 7,000 miles and saving as much as 11 days and $800,000 in fuel and labor. Investment in reinforced vessels jumped fivefold to $2.5 billion in 2006 from $500 million in 1999 and may climb 10% a year through 2010, London shipping broker Clarkson estimated.

Norway's Aker Yards and South Korea's Samsung Heavy Industries Co. are producing ships for such Arctic investors as oil refiner ConocoPhillips and Moscow metal producer OAO GMK Norilsk Nickel.

"We decided we'd be better off with our own" equipment, said Victor Borodin, a spokesman for Norilsk.

Temperatures above the Arctic Circle have risen at about twice the rate of the global average in the last three decades, United Nations data show. Arctic sea ice shrank to the smallest area on record last summer, covering 22% less than the previous low in September 2005, said the U.S. National Snow and Ice Data Center in Boulder, Colo.

Pollution risks are greater in a region isolated from cleanup resources, said David Jackson, the Ottawa manager of the Canadian Coast Guard's ice-breaking service. The grounding in 1989 of the Exxon Valdez oil tanker in Alaska's Prince William Sound, an accident that was accessible only by helicopter and boat, cost $2 billion to clean up.

Norilsk is shipping nickel, copper and palladium north of Siberia to Europe from the Taimyr Peninsula in Northern Russia. One reinforced ship is already in service and four are being built by Aker Yards for delivery by mid-2009, all using new hull designs that allow for bow- or stern-first sailing, depending on the thickness of the ocean surface.

Most of the Siberia route is navigable from June through September, and it may become the first trans-Arctic channel open to reinforced vessels, said Douglas Bancroft, director of Environment Canada's Ice Service, a government agency.

"The price of oil and gas will drive Arctic shipping growth," Bancroft said.

The next most likely route to open is a straight line across the magnetic North Pole, bulldozed by a new generation of ships. That course would save 4,000 miles and 11 days compared with an 11,000-mile, one-month trip between Hamburg and Yokohama, Japan, via the Suez Canal.

The shorter route also would shave $800,000 from the cost of sailing a Panamax class, 75,000-deadweight-ton freighter, London broker Howe Robinson & Co. said.

The number of voyages in the Canadian Arctic jumped to 132 last year from 78 in 2005, according to the Canadian Coast Guard.

"If the northern sea route or Northwest passage opens up, it truly does open a whole new world of commerce in terms of our ability to move around the globe," said Sen. Lisa Murkowski (R-Alaska).

Investment is underway. The portion of the world's commercial tankers that can ply frozen waters will rise to as much as 10% this year from 3% in 1992, broker Clarkson estimated. As of December, the order backlog for reinforced ships stood at 152, almost half the size of the current worldwide fleet of 352 such vessels, Clarkson said.

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