Russia presents an ambitious 5-year plan for Arctic investment

Russia is planning 5.5 trillion rubles of invest on infrastructure and development in the Arctic by 2024.

By Atle Staalesen, The Independent Barents Observer - December 14, 2018
The port of Sabetta, on the Yamal Peninsula, is home to facilities for Yamal LNG, a project driving much of the current growth along Russia’s Arctic coast. (Atle Staalesen / The Independent Barents Observer)

Russia plans to invest some 5.5 trillion rubles (about €72 billion, or $82 billion) on regional infrastructure and natural resource development in the Arctic in its next five-year-plan. That’s an amount equivalent to the country’s national budget on health and education — though leaders expect much of that investment to come from private sources.

Minister of Natural Resources Dmitry Kobylkin announced details of the plan at government meeting Monday in Sabetta on the coast of the Yamal Peninsula, where he had traveled, along with Prime Minister Dmitry Medvedev and other key government ministers and business leaders.

The 5.5 trillion sum only covers the period until 2024, Kobykin said. In the subsequent years, investments will be significantly higher.

“We have made estimates, based on existing investment program for the period until 2050, and the sum is about 13.5 trillion rubles,” Kobylkin told Medvedev.

And only 900 billion rubles (€12 billion) of this sum will be provided by the federal budget, he made clear. The rest — 12.6 trillion (€167.8 billion) — will be invested by companies.

Investment region

The figures delivered by Kobylkin cover investments in regional infrastructure and natural resource development, including railway construction, new sea ports and development of hydrocarbon and coal fields.

The Arctic five-year plan comes as government officials try to meet President Vladimir Putin’s so-called May Decrees, which include boosting shipping on the Northern Sea Route to 80 million tons of goods by year 2024.

The 5.5 trillion investment sum mentioned by Kobylkin is comparable what the Russian government today invests in healthcare and education combined. The country’s national budget for 2019 includes a total of 663,2 billion rubles in education and 460,3 billion in healthcare.

Big oil, gas and coal

There was no talk about the aggravating and potentially devastating climate changes that are unfolding in the Arctic. The meeting headed by Medvedev had its focus not on nature protection, but on exploitation.

According to Medvedev, the Arctic is Russia’s natural resource region number one and the strategic importance is immense.

“This is where we decide our two most important tasks — the providing of the national security of our country and, of course, its economic interests,” he said.

“Our focus should be on the development of huge so-called anchor projects, that will create completely new conditions for the development of the Northern Sea Route and its year-round utilization.”

Pleasing Putin 

The meeting in Sabetta was held as Novatek officially launched the third train in its Yamal LNG project, consequently boosting production to 16.5 million tons per year.

And more is in the making. By year 2035, Russia intends to increase its stake in global production of liquified natural gas from the current 4 percent to 20 percent. Several new projects are under development, among them the Arctic LNG-2 on the Gydan Peninsula.

According to Medvedev, Novatek’s two LNG projects — the Yamal LNG and the Arctic LNG-2 — will alone bring more than $30 billion per year in foreign currency revenues. And the two projects will account for 40 million tons of goods shipped on the Northern Sea Route. That, however, is only half of what is requested by Putin.

The remaining volumes will come from new oil and coal fields. The Taybass coal project near Dikson in the Taymyr Peninsula is to produce 12 million tons by year 2024 and the Payakha oil field in the Yenisey river delta will by that same year produce up to 6 million tons, according to Minister of Energy Aleksandr Novak.

Novak also highlights the importance of Rosneft’s Pobeda oil field in the Kara Sea, the major deposit discovered in cooperation with ExxonMobil in 2014. According to the energy minister, the Pobeda holds about 130 million tons of oil and 500 billion cubic meters of natural gas.

Another project mentioned in the meeting is the Peschanka copper project in Chukotka, which is to deliver 500,000 tons of goods to the NSR by 2024.

According to Novak, the mentioned projects will provide a total of 65 million tons of goods per year for the NSR. By 2030, the annual volumes will increase to 95 million tons and by 2035 — to between 130-160 million tons.

New infrastructure

The Russian Arctic plans leans on massive development of new infrastructure.

“It is not enough to build only port terminals, we have to build also pipelines, railways, develop aviation, energy capacities,” Medvedev said in the meeting.

Everything is to be centered around the Northern Sea Route. Included is also the so-called Northern Latitudinal Passage, the projected railway that will connect the powerful mineral and metal processing plants in Western Siberia with northern ports. The first part of the project includes 500 kilometers of new railway, including a bridge across the Ob River. The second part of the project includes a new railway to Sabetta.

The price tag for the Northern Latitudinal Passage is 240 billion rubles (€3.2 billion), of which the government budget will account for only 5 percent, Medvedev said. When the rail link to Sabetta is ready, a additional 25 million tons of goods will find its way to the Northern Sea Route, the government says.

Among the first new regional objects to be built is the port of Utrenny, that will serve the Arctic LNG-2. According to Transport Minister Yevgeny Ditrikh, the new port will have a capacity to handle an annual 21.6 million tons and be ready for operations by year 2024. A total of 152.7 billion rubles (€2 billion) are to be invested, of which 112.2 billion (€1.5 billion) will be federal money.

Murmansk terminal

New infrastructure outside the Northern Sea Route will also be needed, the ministers underlined. A new terminal in the Ura Guba, on the Kola Peninsula, will have capacity to handle an annual 20.9 million tons and be ready in 2023. A total of 20.1 billion rubles (€267 million) are to be invested, of which the government will provide only 900 million (€12 million).

In the meeting, Novatek CEO Leonid Mikhelson insisted that the building of the terminal is moved forward to year 2022, in order to end the current temporary ship-to-ship reloading of LNG in Norwegian waters.

A similar terminal will be built in Kamchatka on Russia’s Pacific coast. That object will include 30.5 billion rubles (€405 million) of state investments, Mikhelson said.