Transshipent hubs: A case study of Kirkenes

A new case study concludes that Kirkenes can take a fundamental position in NSR traffic. The newly published master thesis examines the enabling and constraining factors for an Arctic transshipment hub in Norway.

  • By CHNL

The thesis discover the characteristics of Arctic transshipment hubs and establishes a general framework for such hubs. This is the ultimate contribution of the thesis.

– It is important to explore these factors and how they will impact future development of the Northern Sea Route shipping system, says former student Morten Hals.

Figure 6.1: Distinctive chatacteristics of Arctic Transshipment hubs (Hals, 2020)
Enabling and constraining factors

One or two transshipment hubs in the Kirkenes/Murmansk area would result in transshipment of cargo at each end of the Northern Sea Route. As of today increased shipping in the High North still have technological and economic constraints. For instance, Arctic shipping needs very expensive purpose built vessels, like ice-class ships and icebreakers. Despite this obstacle there is a growing interest in the NSR from the Russian government. They work for the realization of cargo being transported on a year-round basis on a predictable shipping schedule.

– The geopolitical contention between Russia’s strength in the area, Chinese trade interests and potential US sanctions are the main predicament for Arctic shipping. Any potential transshipment hub projects in the Arctic will need to navigate between the demands and needs of these countries, as well as other Arctic nations.

The thesis concludes that Kirkenes can take a fundamental position in NSR traffic, as it is an ice free port and has a strategic location. Being the easternmost port of Norway, and sits right in the shipping lane of future NSR traffic. It is also strategically located on Norway’s border to Russia, less than 150 km from Murmansk. The plans for the Arctic Corridor would establish a direct land connection between the western end of the NSR and Europe, and make a transshipment hub in Kirkenes even more significant.

– A constraining factor is that I have not found any indications of a comprehensive environmental impact assessment (EIA) or other studies with regards to the Kirkenes port development and the Arctic Railway plans. Such initiatives needs to be undertaken before future development can commence, Hals states.

However, the thesis underline that FTIA reports Lapland’s natural environment to be vulnerable, as to untouched wilderness and protected areas. These areas would need to be bypassed when detailed planning starts.

An enabling factor is that the melting of sea ice will enable shipping with less ice-breaker support. Patrons of the NSR and Arctic Railway also argue that this combination reduces CO₂ emissions compared to the competing Suez Canal route. However, any activity will impact the local ecosystems, which are among the most pristine and fragile in the world. Moreover, the future of Arctic shipping is contingent on drastically reducing the sulfur and carbon emissions from ships operating in the Arctic. The IMO Polar code states that from year 2029, a complete ban on heavy fuel oils will apply. This is forcing shipping companies to switch to greener alternatives, as the industry is meeting constantly more rigorous regulations in the area.

Chart 5.1: Kirkenes posesses multiple advantages within all four dimensions, but is also facing uncertainty and challanges as the planning and construction proceeds.
Proposed chronology for port development

Transshipment of LNG from Yamal is already occurring in Norwegian waters. 44 % of the LNG from the Yamal LNG was transshipped in Norway last year and additional extraction projects are commencing rapidly in the area. This is conceivably a big opportunity for Kirkenes, if they manage to establish a permanent LNG hub with storage facilities in the new port.

There are export potential from both petroleum and mining industries, which speaks in favor of a hub. However, the downsides are found to be the high construction expenses, uncertain financial backing and of course the sensitive environmental interests.

In regards to the financial backing Hals recommends the government to focus more on developing transshipment facilities in Kirkenes that generates money in the short term. The argument for this is the chance of it being a much more sustainable approach from an economic perspective and could conceivably attract private investors in the long term.

– I suggest that all levels of government establish a common understanding of the way forward with attention to financing options and the necessary legislation, Hals writes in the thesis.

Looking ahead, there are opportunities to export minerals from both Norway and Finland through a new port. Hals suggests this to be the authorities’ goal in the medium to long term:

  • Short term: Establish LNG transshipment terminal
  • Medium term: Facilitate mineral export and other services
  • Long term: TEU transshipment with railway connection as ultimate goal

Discover more about this thesis and Hals` developed framework on Arctic hubs here.

Note: This master thesis is part of a research project called Significance of Eurasian Arctic Transshipment Hubs for Arctic Shipping, undertaken by the CHNL. CHNL funded parts of the thesis, and CHNL`s associate professor, Dr. Roberto Rivas-Hermann, supervised Hals.

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