Shipowners must wait for Arctic exploitation

In September 2013, a Russian oil tanker was damaged by ice while attempting to traverse the Arctic Ocean. It took five days for the first icebreakers to arrive on the scene to rescue the ship and another two days for a second tanker to come alongside to transfer the troubled vessel's cargo.

The Russian tanker's distress underscores the considerable difficulties facing energy and transportation companies-and interested national governments-as they seek to boost economic activity in the Arctic. The common assumption has been that oil drilling and other extractive industries stand to reap big, easy, and near-immediate benefits from the melting of much of the ice sheet in the northern seas, which seems to be accelerating as a consequence of climate change. But that assumption does not reflect reality.

It is true that the impact of the Arctic Ocean remaining open for longer periods, perhaps even year-round, could revolutionize energy and shipping because that route saves ships significant transit time, fuel, and other costs compared with traditional routes for trekking from one hemisphere to another. The phenomenon is of particular interest to Russian companies such as oil giant Rosneft, as well as the Russian government, because intensified development of the nation's vast hydrocarbon resources is likely to hold the key to successful diversification of the flagging national economy.

Yet even for Russia-whose territory includes about half the coastline of the Arctic Ocean-the potential of this phenomenon will develop only slowly. Exploitation of the Arctic is in the very earliest stages of development for a number of reasons. First, there is a paucity of large icebreakers available under any nation's flag to ensure that oil tankers do not get snagged unexpectedly and dangerously-still a frequent occurrence in the vast expanses of the frozen Arctic. Second, even ships that manage the passage without incident must deviate from the most cost-efficient direct routes through the region to avoid the dangers of ice. Third, IHS Maritime cites evidence that neither mariners' safety nor protection for the vulnerable Arctic ecosphere can be guaranteed.

Another factor that discourages prospects is that a free-and-clear Arctic route might not be tempting for some of the biggest potential players. Only one-fifth of China's global trade, for instance, is with Europe. And with container rates so cheap for shippers on routes via Singapore and Suez, there is little incentive for the Chinese to ply the Arctic.

Richart Clayton, Chief Maritime Analyst, IHS Maritime