The New Polar Code and Commercial Aspects of Arctic Shipping

Press Release April 27, 2011

Per Sønderstrup, Head of Centre, Danish Maritime Authority is not only dealing with the shipping around Denmark, with some 40,000 ships passing Copenhagen every year, and another 20,000 ships passing the Stora Belt passage in and out from the Baltic Sea. His department also governs shipping activities in a much larger and environmentally more challenging area, Greenland. "We have there a coastline of about 40,000 kilometres and it is a quite different challenge we have out there," he says, referring to shipping safety issues. The number of ships operating in this huge area is small. 44 ships visited in 2008. "I do not think the numbers has changed that much from then." There were 14 cruise ships, the biggest with up to 4,200 people onboard. Other ships sailing in Greenland waters were 14 survey ships, 5 cargo vessels, 6 navy vessels, 4 police vessels and one cable ship. Sønderstrup notes that there is increasing economic activity with increasing cruise traffic. Some 26,000 cruise passengers visit Greenland annually and there are some offshore survey related activities as well. "There are millions of square miles that have not been adequately surveyed yet. The weather conditions are extreme, the area is remote with very limited infrastructure and search, rescue and pollution combat capacity, and then there is the ice," he notes. "Before we had the local operators, with 30 years experience up there. We did not need to regulate that much as they had the knowledge of how to build the ships, and how to operate them. Now we see a lot of different ships coming out there, with different nationalities." Sønderstrup points out that this is the reason why we need an international legal framework for operating in the Arctic.

The first proposal to a Polar Code was IMO's Guidelines for ships operating in Arctic ice covered waters, adopted in 2002. In the guidelines there was reference to the Unified Requirements for Polar Class adopted by IACS (International Association of Classification Societies) in 2006 which has put the framework for operation in icebound waters. The guidelines were revised and approved in 2009 to include both the Arctic and the Antarctic. There is also the STCW (Standards of Training, Certification & Watchkeeping Convention) code amended i 2010 by IMO to include guidance regarding training of masters and officers for ships operating in polar waters.

Regarding accidents Sønderstrup notes it is not only a question of having sophisticated helicopters and rescue ships in the area. "The problem is, where do you put all these cruise ship passengers and crew members?" He stresses the importance of this. "When you go up there, you should look at which other ships there are in the area, when considering whether you can have sufficient aid if something goes wrong." Denmark participates in IMO's work for a mandatory Polar Code. "IMO is working slowly but as fast as possible," Sønderstrup notes. "Ongoing we have a Correspondence Group that tries to draft a new Polar Code. This new Polar Code is not only for ice covered waters. It will be for operating in the Arctic." Sønderstrup notes the work plan is to have the Polar Code ready for approval in late 2012. "My guess is that for the time being it might not be 2012 but 2013," he says. For the Danish Maritime Authority the long term perspective is to develop a Risk Based Polar Code, as a supplement to IMO instruments.

Commercial aspects of the Arctic Region

Talking about the commercial opportunities in the Arctic region, for Danish shipping, René Piil Pedersen, Director at the Danish Shipowners' Association divides these into three commercial pillars, the Arctic Sea Routes, the Eastern and Western transport corridors, Arctic Trade, providing maritime transport in and out of the Arctic, and Arctic Energy, production and related maritime services regarding oil, gas and other raw materials.

Also Denmark has ambitions what comes to voyages along the North East passage, or the Northern Sea Route, as it is called in Russia. In 2010, Nordic Bulk Carriers took a cargo of 41,000t of iron ore with the ice class 1A bulk carrier MV Nordic Barents, from Kirkenes in Norway to Xingang in China, making the trip between September 4 and 27. Despite the fact that this was not the first ever commercial transit through the Northern Sea Route, as claimed by the company (a lot of Russian ships and at least two Finnish tankers have done it years ago, in addition to Adolf Erik Nordenskiöld, a Finnish-Swedish geologist, who made the trip on Ms Vega back in 1878, without commercial cargo onboard though), the shortcut through the Arctic reduced the trip by 18 days and saved more than 450 tons of fuel, for the company. The trip was, according to Pedersen, commercially a success.

There are no current plans for more immediate such sailings, but future possible sailings would be done in close cooperation with Russian authorities. "Nuclear powered icebreaker assistance is still needed in summer time for such an operation," says Pedersen. He obviously refers to ships of the type of MV Nordic Barents. Pedersen points out some obstacles. "The water depth in the Dimitry Laptev Strait is 6.7m, restricting ship size to 20,000dwt. The Sannikov Strait has a water depth of 13m, a little deeper but still not allowing ships of more than 50,000dwt, "so we will not see super tankers and VLCC's there in the near future." He points out the challenge of retaining speed which requires icebreaker assistance. This is not always available. The insurance costs are high and there are many more obstacles, which he does not define. "For the time being icebreaker assistance is offered below cost," Pedersen thinks. "In the long run they would not offer this service below cost, but the problem is also how to calculate cost for a 15 years old nuclear powered icebreaker."

The distance from Rotterdam to Yokohama becomes 34% shorter by going through the Northern Sea Route, but is just 9% shorter between Rotterdam and Hong Kong, and 23% longer between Rotterdam and Singapore. Pedersen points out that you would very seldom see a containership trading between Rotterdam and Yokohama with say 10,000 containers. The vessel would be trading on its way, in the Mediterranean Sea, in the Suez, Red Sea, India and the Far East before arriving in Yokohama, with perhaps 400-500 containers, making the northern route not a realistic alternative. "You will not see the Arctic as a Maritime Highway in the near future, at least for a decade and probably also the next. The day we do not have any ice up there it may change," Pedersen concludes.

When looking at the Arctic Trade, with ships going in and out of the Arctic, Pedersen believes this will be of a much higher volume. "If you look at the 90 billion barrels of oil, the estimated undiscovered conventional oil of the Arctic, when the production in the North Sea peaked in 1999, we were producing 2 billion barrels a year in all of the North Sea. It is really our future energy supply which could come from this area." He also point out that when you are to develop the Arctic oil and gas resources and the mining industry, a lot of labour, supplies etc. is needed. This calls for an increasing number of ships of all kinds to supply Arctic areas. "Just when you look at Greenland, if you want to develop one third of the licenses existing today in Greenland, you have to take 15,000 people to Greenland, at the same time as the total local population is 15,000 to 18,000 people. "This would mean a huge market, also for Danish shipowners."