How to save $1 mln by renting a pair of nuclear-powered icebreakers

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Almost a month ago, a reinforced ship filled with highly chilled liquefied natural gas embarked from the Norwegian port of Melkoya for the Japanese port of Tobata. There are hundreds of such shipments a year, most of them through the Suez Canal, which saw 676 of them in the first ten months of this year. What has been unusual about the journey of the carrier Ob River is that it is the first LNG shipment through the hitherto impassable northeastern Arctic Sea passage, made passable by the partial melting of the ice due to global warming. For this it required the assistance of two nuclear-powered Russian icebreakers.

The Ob River left Melkoya, nestled among the fjords at the northern tip of Norway, on Nov. 7. Soon, it was joined by the icebreakers, the 50 Let Pobedy and the Vaygach, which accompanied the LNG carrier until Nov. 14. The Ob River is to deliver (paywall) its cargo to Japan on Dec. 4.

The icebreakers have dangers transcending the ice—a fire broke out aboard the Vaygach last December, and killed two sailors. The Ob River itself had to be reinforced for the trip. So why take the risk? It is to tap growing Asian markets as Europe’s appetite for gas has fallen, and the US import market has vanished. When they ship east, producers going from Rotterdam to Yokohama (a roughly similar distance to Melkoya-Tobata) traverse just 8,500 kilometers, compared with 20,600 km if they go the long way through the Suez Canal. Shanghai, too, is shorter—14,875 km compared with 19,300 km the long way.

But wouldn’t renting two nuclear icebreakers be a mite pricey? Well, according to a Russian official quoted by marine news agency (link in Russian), the Vaygach cost 3.3 million rubles a day in 2011, or a little over $100,000. Assuming two such icebreakers for a week, that adds around $1.5 million to the cost.

That has to be set against the savings of a shorter trip by the tanker. The northeastern route from Norway to Yokohama takes around 20-21 days less than the Suez route. Rates for LNG tankers fluctuate a good deal, but were expected to average around $125,000 a day in the last quarter of this year, so that’s a difference of some $2.5 million.

Overall, then, assuming the same daily rate for the Ob River, we can estimate that the trip via the northeast passage saved about $1 million. That doesn’t take into account the one-time cost of reinforcing the tanker; and the northeast passage is open only one month a year, which means the opportunities for such savings are limited. But the fact that it was considered worthwhile at all is telling, since shipping LNG the long way round from Europe is considered ridiculous: Japan can get LNG directly from Australia and Qatar.

To grasp the scale of the melting that made the trip possible at all, watch this video, released in September by the US National Oceanic and Atmospheric Administration.

But the much underestimated force in play is the treacherous ice itself. When ice floes move, they can envelope and crush enormous man-made structures. One commenter watching this video, shot in 2007 on the Bering Strait in Wales, Alaska, compares the floe to a “horizontal avalanche.”

After the Ob River reaches port, shippers will have to wait until next year for another chance. Russia declared the northeastern route closed as of Nov. 20.