[Reader-list] Global Warming and Commerce

[Ananth S]

Global Warming Melts New Sea Lanes for Norilsk, ConocoPhillips
By Hugo Miller

http://www.bloomberg.com/apps/news? 
pid=20601109&sid=aQ4ROJIItxvU&refer=home

  Feb. 26 (Bloomberg) -- Norilsk, the world's biggest producer of  
nickel, is building its own shipping fleet 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. Norilsk  
is spending at least 320 million euros ($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,'' says Rear Admiral  
Timothy McGee, head of the U.S. Navy's Meteorology and Oceanography  
Command.

Global warming, while threatening environmental disasters, is  
creating economic opportunity for shippers, 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  
percent faster and increase Arctic tourism as much as 50 percent in a  
decade.

Ice shrinkage may enable ships to sail straight over the top of the  
world, cutting an 11,000-mile (17,699-kilometer) 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 percent a year  
through 2010, London-based shipping broker Clarkson Plc estimates.

Norway's Aker Yards AS and South Korea's Samsung Heavy Industries Co.  
are producing ships for Arctic investors including oil refiner  
ConocoPhillips and metals producer OAO GMK Norilsk Nickel.

``We decided we'd be better off with our own'' equipment, says Victor  
Borodin, a spokesman for Moscow-based Norilsk.

Pollution Risks

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

Pollution risks are greater in a region isolated from cleanup  
resources, says David Jackson, the Ottawa-based manager of the  
Canadian Coast Guard's icebreaking 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.

Ships unfamiliar with operating in Arctic waters may add to pollution  
if they pump bilges overboard or dump other waste in the sea, Jackson  
says.

Bulldozed North Pole

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.

While Norilsk and others may benefit from the melting, Borodin says  
the ship orders were driven by cost calculations rather than global  
warming.

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

``The price of oil and gas will drive Arctic shipping growth,''  
Bancroft says.

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.

`Whole New World'

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

The number of voyages in the Canadian Arctic jumped to 132 in 2007  
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,'' says Senator Lisa Murkowski, a Republican  
from Alaska.

Investment is under way. The portion of the world's commercial  
tankers that can ply frozen waters will rise to as much as 10 percent  
in 2008 from 3 percent in 1992, Clarkson estimates. 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 says.

The Bloomberg World Shipbuilding stock index, which includes Samsung  
Heavy Industries, climbed 252 percent in the three years through Feb.  
1, stoked by demand for all classes. Aker Yards gained 41 percent in  
Oslo in that time, while Samsung climbed 251 percent.

Arctic Danger

Samsung, the world's third-biggest shipbuilder, is making three  
reinforced oil tankers for Russia's OAO Sovcomflot and ConocoPhillips  
for $450 million. Sovcomflot will operate them for ConocoPhillips,  
the second-largest U.S. refiner, to carry crude south for processing,  
says ConocoPhillips's chief naval architect, Peter Noble. More mobile  
floes are a reason Conoco is embarking on the project, he says.

In the rush to explore waterways, bigger ships are making mistakes.  
Seventeen British tourists were injured last August when chunks of  
glacier fell onto the deck of the Russian cruise ship Aleksey  
Maryshev near the Norwegian Island of Spitsbergen.

On Canada's Frobisher Bay 1,240 miles north of Montreal, Andrey  
Rudenko edges the Lyubov Orlova through the Arctic night. The captain  
of the 122-passenger polar expedition ship, refitted in 2006 for  
Arctic tourism cruises, studies his charts for shoals by the glow of  
instruments.

`Always Changing'

Global warming means rocks can pose as big a threat as ice.

``I don't know what to expect any more,'' says Rudenko, 45, who went  
to sea at 15 from his Russian hometown of Novorossiysk on the Black  
Sea. ``Conditions are always changing.''

Dugald Wells, president of Cruise North Expeditions Inc., which  
offers eco-tours aboard the Lyubov Orlova, agrees.

``A lot of damage is caused by shipping that doesn't know the waters  
in and around the Arctic,'' Wells says.

One area of interest for oil companies is the Alberta tar sands, a  
region of boreal forest the size of Florida in northern Alberta 455  
miles north of Calgary. Geologists estimate it may contain the  
world's largest oil reserves outside Saudi Arabia.

Getting heavy equipment to the oil poses a challenge because drilling  
machinery must be flown or driven to the site, forcing up costs. The  
tar sands are accessible via the Mackenzie River, a 1,080-mile long  
waterway that links the Beaufort Sea north of Alaska and Great Slave  
Lake just north of the sands.

Longer Sailing Season

An open Mackenzie River for at least nine months a year would provide  
a conduit from the Beaufort Sea to the tar sands region.

``By 2012, we're going to see a lot more barge traffic down the  
Mackenzie,'' the Canadian Coast Guard's Jackson says.

Northern Transportation Co., a Hay River, Northwest Territories-based  
operator of tugs and barges, says freight increased 59 percent last  
summer as it shipped supplies to a Royal Dutch Shell Plc project on  
the Beaufort Sea and a gold mine operated by Miramar Mining Corp.

Churchill on the western shore of Hudson Bay is best known as a  
magnet for polar bears and as a sleepy, underused port. That may  
change: Ice cover in the bay during the warmest months has dropped  
about 50 percent since 1970, says John Falkingham, chief forecaster  
at Environment Canada.

More Tourists

Omnitrax Inc., based in Denver, bought the port operations at  
Churchill in 1997. The sailing season has since lengthened by at  
least two weeks a year, managing director Mike Ogborn says.

The port of Churchill has been used almost exclusively for exports,  
with just one single inbound shipment of copper concentrate in the  
past six years, says Ogborn. Last summer there was one delivery of  
12,000 metric tons. In 2008 that may increase to as much as 100,000  
tons, he says.

``The buzz this shipment has created is tremendous,'' says Ogborn,  
who has heard from businesses in Canada and Russia interested in  
importing goods into North America via the port.

Omnitrax is spending at least $20 million to upgrade the rail line  
that links Churchill in northeast Manitoba to tracks that run south  
into the U.S., 750 miles away, and Canadian Prairies. Sailing time  
from Murmansk, Russia, to Churchill is about 10 days, four days  
faster than via the Great Lakes ports which serve as hubs for  
railroads into the Prairies, he says.

Cargo vessels are increasingly joined by Arctic tourist ships in  
plying northern waters. The number of travelers visiting the Arctic  
has risen to more than 1.5 million from about 1 million in the early  
1990s, a rate that will accelerate in coming years, a June 2007 study  
by the United Nations found.

Vacation in Nunavut

Cruise ships accounted for 2,096 visitors to the Canadian Arctic in  
the summer of 2007. The number of cruise voyages in the region  
climbed to nine in 2006 from seven in 2005.

Tourism in Nunavut, an area the size of Western Europe with just  
31,000 residents, is increasing as well. Total visitor spending in  
Nunavut, whose capital Iqaluit is 1,280 miles north of Montreal,  
reached $3.5 million in the summer of 2007 with 18,000 tourists,  
according to the first study of its kind in the territory,  
commissioned by the local government.

The increase is significant to a small population, says John Snyder,  
editor of the 2007 book, ``Prospects for Polar Tourism.''

``Ecotourism is quite clearly a vital part of the economic base,'' he  
says