How To Predict Future Shipping In The Arctic

Transcription

1 Shipping across the Arctic Ocean A feasible option in as a result of global warming? Research and Innovation, Position Paper

2 This is DNV DNV is a global provider of services for managing risk. Established in 1864, DNV is an independent foundation with the purpose of safeguarding life, property and the environment. DNV comprises 300 offices in 100 countries with 9,000 employees. Our vision is global impact for a safe and sustainable future. Research and Innovation in DNV The objective of strategic research is through new knowledge and services to enable long term innovation and business growth in support of the overall strategy of DNV. Such research is carried out in selected areas that are believed to be particular significant for DNV in the future. A Position Paper from DNV Research and Innovation is intended to highlight findings from our research programmes. Contact details: Lars Ingolf Eide: lars.ingolf.eide@dnv.com Magnus Eide: magnus.strandmyr.eide@dnv.com Øyvind Endresen: Oyvind.Endresen@dnv.com

3 Summary Arctic sea ice is in rapid decline, and this may open up new opportunities for economic activity. This paper describes a scenario for future shipping activity and emissions in the Arctic, specifically related to transpolar container shipping and petroleum extraction. The future Arctic transit shipping activity level and the resulting emissions have been modelled by jointly assessing the volume of global seaborne trade and the attractiveness of selecting the Arctic transit route rather than traditional sea routes (e.g. via Suez). Future shipping activity and emissions related to petroleum extraction have been estimated based on projected production data. The results show that part-year arctic transit may be economically attractive for container traffic from North Asia between 2030 and With a projected Arctic trade potential of 1.4 million TEU in 2030, this amounts to a total of about 480 transit voyages across the Arctic in the summer of For 2050, the Arctic trade potential rises to 2.5 million TEU and the total number of Arctic transit passages (one-way) in the summer of 2050 is about 850. Due to shorter travel time and the need for a smaller fleet to carry the same amount of cargo between Asia and Europe by going across the Arctic compared with the route via the Suez Canal, CO 2 emissions are reduced by 1.2 Mt annually in 2030 and by 2.9 Mt annually in 2050.

4 Introduction During the last decades of the 20 th century and the first decade of the 21 st century, the Arctic has experienced some of the most rapid temperature increases on Earth. On average, the mean annual air temperature has increased at approximately twice the rate of the rest of the world. Reductions in sea ice extent, particularly in summer, decreased ice thickness, melting glaciers, thawing permafrost, and rising sea levels are all indications of warming in the region over the last three decades. Acceleration in these climate trends is projected for the next decades of the 21 st century (ACIA, 2005; IPCC, 2007a). Seaborne cargo transport in Arctic waters has previously been limited (PAME, 2000; Corbett et al., 1999; Endresen et al., 2003). Increased melting of Arctic sea ice may lead to a longer navigation season, improved accessibility for shipping, and extended use of the shipping routes along the margins of the Arctic basin (the Northern Sea Route, NSR, and the Northwest Passage, NWP). Travel distance between Europe and the North Pacific Region can be reduced by more than 40% compared with current sea routes by using the NSR, and by even more if sailing directly across the North Pole becomes possible. Furthermore, with the expected increase in demand for energy, combined with a decrease in production in mature petroleum provinces, in the period , there may be an increasing pressure to develop oil and gas resources in the Arctic region. Continued melting of Arctic sea ice will result in easier access to these resources and may open up for more exploration and production activity, as well as increased ship transport of hydrocarbons. DNVR&I has been involved in several research projects that aim to establish knowledge and understanding on how the changing climate of the Arctic may affect shipping and petroleum-related activities. Recently, DNVR&I has contributed to several papers and reports related to these topics (Bitner-Gregersen & Eide 2010; Dalsøren et al., 2007; Mejlænder-Larsen, 2009; Peters et al., in preparation. Nilssen et al., 2010; Eide et al., 2010a). This paper gives a short overview of past and present development of shipping activities in the Arctic, and develops future scenarios for shipping activity and CO 2 emissions towards The paper separately addresses the future transit traffic and the ship traffic connected to future oil and gas activities. Other types of ship activities, such as tourism, fisheries, and national shipping, are not considered. Projections for ice conditions towards 2050 are also given, as these will significantly influence the future development of ship activity and petroleum activities in Arctic. The future Asia-Europe Arctic transit shipping activity and the resulting emissions in 2030 and 2050 are estimated using a new model developed by DNVR&I (Nilssen et al. 2010; Nilssen et al., in preparation) as part of the Norwegian Research Council project, ArcAct (Unlocking the Arctic Ocean: The Climate Impact of Increased Shipping and Petroleum Activities) 1. The model is used to compare costs for a selected Arctic sea route with the traditional Suez Canal route, by applying projected ice data, modelled speed and fuel consumption of ships in ice, and by adding costs of building and operating ships capable of Arctic operation (e.g. ice class). The cost 1 The principal objective of ArcAct is to quantify the climate impacts, in terms of radiative forcing, from potentially increased oil/gas and shipping activities in the Arctic regions due to diminishing ice cover. The consortium consists of CICERO (responsible), the University of Oslo, the Norwegian Institute for Air Research, and DNV. 4

5 comparison is made for routes originating in several Asian ports. If the Arctic route from a given port is favourable in economic terms, the model determines the number of passages and resulting emissions based on the projected cargo volume to be transported and the selected ship concept (i.e. cargo capacity and sailing season). Future shipping activity and emissions related to petroleum extraction have been estimated based on projected production data provided by ArcAct project partners. The emissions from tanker vessels have been modelled by constructing shipping routes and locating transhipment ports based on the production data. For supply vessels, a simplified statistical approach is used to correlate the amount of fuel consumed with the amount of petroleum extracted. This paper is divided into nine sections. Section 2 discusses the challenges associated with operations in the Arctic under the current ice and metocean conditions, Section 3 reviews shipping activities in the Arctic, and Section 4 outlines a future ice scenario. Section 5 presents the model, with assumptions and input data, and compares the results for the most economically favourable shipping scenario with other studies. Section 6 indicates possible future shipping activity associated with oil and gas activities. Challenges associated with the expected increase of activity in the Arctic regions are summarised in Section 7. Conclusions are provided in Section 8 and recommendations in Section 9. 5

6 Present ice and metocean conditions and challenges connected to operating in the Arctic The physical parameters that pose challenges to operations in the Arctic are mainly related to the high latitudes and low air and sea temperatures. These were reviewed in the Barents 2020 project (Eide, 2008) and include: Sea ice and icebergs that represent hazards to the integrity of ship hulls and platforms. Icing from sea spray, precipitation, and fog, which raise both stability problems and other safety issues. Polar lows (small storms that are difficult to detect and predict). Wind chill, i.e. combinations of low temperatures and strong winds, which is a safety and health issue. Remoteness, with implications for rescue, emergency operations, and communications. Darkness in winter. Reduced visibility from fog and precipitation. Less reliable weather forecasts than in e.g. the North Sea. In general, information on the the meteorological and oceanographic conditions, like winds and waves, in the parts of the Arctic with seasonal or all-year ice cover is poor. Despite the challenges listed, the dramatic changes in sea ice conditions over the last three decades, particularly in summer, have spurred speculations that the Arctic Ocean may become an alternative sea route between Asia and Europe and North America. Figure 1. Summer and winter development of sea ice extent in the Arctic , deviations from mean values for the years (Perovich et al. (2009) with March 2010 added) Sea ice in the Arctic has shown dramatic changes over the last 30 years, (see Figure 1; updated from Perovich et. al., 2009). The extent of summer ice (September) has, on average, declined by roughly 9 % per decade between 1979 and 2009, and the extent of winter ice (March) by 2.5 % per decade. September 2007 had the smallest ice extent on record. Ice thickness has also decreased considerably in the last three to four decades. Based on sonar data from submarines for and satellite data from , Perovich et al. (2009) estimated a reduction of mean winter sea ice thickness from 3.4 m in 1975 to 1.9 m in 2008 (via a maximum of 3.6 m in 1980), caused by decreasing amounts of old and thick ice. 6

7 Shipping activities in the Arctic The seaborne cargo transport in Arctic waters has previously been limited (PAME, 2000; Corbett et al., 1999; Endresen et al., 2003). An extensive study of present ship activity in the Arctic was undertaken by PAME (2009). The study used 2004 as the base year, and concluded that shipping activity was dominated by community re-supply, fishing, and tourism. There is also export from a few large mining operations in Alaska (zinc) and Russia (mainly nickel but also other minerals), according to Glomsrød and Aslaksen (2006, 2009) and Ocean Futures (OF, 2010). Figure 2, from PAME (2000), shows the main traffic routes used by commercial ships in the Arctic. Note that some icebreakers and submarines have also visited the North Pole. 2000). In 2009, the Bremen-based Beluga Group became the first Western company since the war to transit the NSR, cutting 4000 nautical miles (7400 km) off the journey between Ulsan, Korea and Rotterdam (Beluga Group, 2010). Community re-supply is taking place along the NSR and NWP. Fishing mainly takes place in the ice-free waters around Iceland and in the Bering, Barents, and Norwegian Seas, and tourism is at its greatest intensity along the coasts of Northern Norway, Southwest Greenland, and Svalbard (PAME, 2009). Presently there is limited transport of oil and gas by ships from the Arctic, and most of it takes place on the Eurasian side. The part of the oil export from Russia that passed the Norwegian coast increased from around 4 Mt (million tonnes) in 2002 to 16.5 Mt in 2009 (The Norwegian Coastal Administration, 2010). Figure 2. Major ports and navigation routes in the Arctic, reported by PAME (2000) Commercial transit traffic, except tourism, has taken place only along the NSR, which was opened to foreign ships in The transit traffic peaked in 1993, when, according to Ragner (2000) and Brigham and Ellis (2004), more than tonnes of cargo were carried by Russian ships between Asia and Europe. This fell to zero in 1997, and remained at that level for the rest of the century (Ragner, 7

8 A possible future ice scenario All climate models show that Arctic ice cover is expected to continue diminishing through the 21 st century (Overland and Wang, 2007; Stroeve et al., 2007; Wang and Overland, 2009). Eide et al. (2010a) extracted future ice concentration and thickness for the years for the A2 emission scenario (IPCC, 2007b) from the Community Climate System Model (CCSM3) developed by National Center for Atmospheric Research (NCAR) (Collins, 2006). This model was found to be close to observations between 1972 and 2007 (Overland and Wang, 2007; Stroeve et al., 2007; Wang and Overland, 2009). The A2 scenario is one with modest reductions in CO 2 emissions compared with business as usual. Figure 3 shows the estimated ice concentration and the ice thickness for March and September 2030 (Figure 3a) and 2050 (Figure 3b), as derived with CCSM3 for the A2 emission scenario. It indicates that ice extent can be expected to continue decreasing into the 21 st century, and that the changes in winter ice extent (March) will still be less than the changes in summer (September). The decrease in ice thickness is expected to continue in summer as well as in winter, due to reduced amounts of multi-year ice. Some consequences may be: Changing physical and mechanical properties of sea ice. Changes in frequency and size of ridges and hummocks. More calving, leading to more, but smaller, icebergs. Higher waves and more sea spray icing in ocean areas that will become ice free. More polar lows where the ice disappears. More summer fog. Changed tracks of cyclones and anticyclones in the Arctic. Presently, the impacts on the factors listed above from reduced ice cover as well as from other effects of global warming have not been sufficiently investigated. There is a need to obtain better understanding of how the wind and wave conditions experienced along an Arctic route between Asia and Europe will change as a result of global warming, with emphasis on the extremes. In addition to the modelled changes in ice cover and ice thickness, it is believed that the actual ice properties, along with iceberg occurrence rates and metocean conditions, could change in the Arctic as consequences of global warming. 8

9 MARCH September MARCH September Figure 3a. Sea ice concentration (upper) and sea ice thickness (lower) for March (left) and September (right) 2030 as derived from the CCSM3 model with IPCC emission scenario A2. Data downloaded from Figure 3b. Sea ice concentration (upper) and sea ice thickness (lower) for March (left) and September (right) 2050 as derived from the CCSM3 model with IPCC emission scenario A2. Data downloaded from 9

10 Scenario for transit shipping in the Arctic Compared with the traditional sea routes, transiting the Arctic will always be associated with higher hazard levels (e.g. sea ice and harsh weather), a higher risk of reduced service reliability, and higher costs per unit of distance travelled (ice strengthening, ice breaker support etc). For shippers to choose the Arctic route, the benefits must be substantial and clearly outweigh the disadvantages. These benefits may be found in less travel distance, which can substantially reduce fuel cost, and shorter travel time, which may translate into higher income due to lower inventory-holding costs and increased productivity. Emission reductions may also result in reduced costs, assuming that future external damage costs caused by ship emissions are internalized (e.g. by introduction of tax regime or quota market). Selecting an Arctic route Prior to comparing the economics of Arctic transit vs. Suez transit, the optimal route across the Arctic Ocean should be determined, considering transit distance and ice conditions. Four alternative routes have been considered, as shown in Figure 4. Route 1 is close to the traditional NSR, passing largely within Russian territorial waters. Route 2 is a modified version of the first but avoids some of the shallow areas, and is thus more appropriate for larger ships. In the following section, the developed model (Nilssen et al., in preparation) is outlined, along with the input data applied, and the assumptions made to estimate the future Asia-Europe Arctic transit shipping activity and the resulting emissions in 2030 and The model calculates the costs of a selected Arctic sea route versus the Suez Canal route, enabling a comparison of the alternatives. Costs are calculated by utilizing detailed projected ice data, by modelling speed and fuel consumption of ships in ice, and by adding additional costs from building and operating ships suitable for Arctic operation (e.g. ice class). The comparison is made for routes originating in different Asian ports. If the Arctic route from a given port is favourable in economic terms, the model estimates the number of passages and emissions based on the projected amount of cargo to be transported and the selected ship concept (i.e. cargo capacity and sailing season). Figure 4. Arctic transit routes used in the Arctic transit shipping analysis. The Exclusive Economic Zone of the Russian Federation is shown with diagonal hatching. The orange line marks the Arctic according to the definition of the Arctic Council ( AHDRmap_gen.ai 10

11 Route 3 is designed to lead vessels mostly outside the Russian Exclusive Economic Zone (EEZ), whereas Route 4 goes directly across the North Pole. Figure 5 gives an example of vessel speed due to ice resistance for a 6500 Twenty-foot Equivalent Unit (TEU) container ship with bulbous bow in summer 2030, using the ice conditions in Figure 3a. These speeds are used to calculate transit times. After evaluating the combined effect of fuel consumption, transit time, future ice conditions, and uncertainties in fee and tax regimes, this study has settled on Route 3 for comparison of costs. Note that the difference in summer ice thickness between route 2 and route 3 is not very large (Figure 3), and that route 3 is shorter than route 2. Due to the currently untenable and future uncertain fee level associated with route 2, route 3 has been selected for both 2030 and 2050 in this study. Route 4 is not much shorter than Route 3 and has worse ice conditions (Figure 3)., and is, therefore, not considered a viable option. Furthermore, it is noted that despite the successful transit of the Manhattan through the NWP in 1969 (e.g. Gedney and Helfferich, 1983), traffic through NWP is not considered plausible. This is because the navigation channels suitable for large ships are likely to continue to have difficult ice conditions for many years ahead (Transport Canada, 2005; Wilson et al., 2004), making the route unreliable with respect to transit time, and therefore less attractive to the shipping industry than the eastern alternatives. ASSESSING COMPETITIVENESS OF ARCTIC ROUTES The dominant seaborne trade volume between Asia and Europe is containerised cargo (UNCTAD, 2009). Thus, the analysis is concentrated on this segment. Figure 5. Vessel speed of a 6500 TEU container ship as functions of ice conditions in summer 2030 as projected in Figure 3a. Future Asia-Europe cargo volumes are estimated by translating the IPCC A2 scenario projections for global economic development into global seaborne trade volumes using the strong historical correlation between Gross Domestic Product (GDP) and seaborne trade, as reported by the EU project Quantify (Endresen et al. 2008). In the ArcAct project, these global projections were modified for use on the Asia-Europe trade. Considering that the Asian economies are likely to increase more than the European economies, and that both Asian and European trade with current 3 rd world countries may be expected to grow disproportionately, the 11

12 Scenario Description of scenario Assumptions Baseline scenario Regular Suez trade, 6500 TEU conventional container vessels. All year operation Suez trade S1, Arctic Scenario 1 All-year Arctic operation of 5000 TEU double-acting container vessels (bulbous bow and icebreaking aft, a new concept described in Arpiainen and Kiili (2006)) operating a liner service. All-year Arctic operation along route 3 The double-acting vessels are assumed to have 120% higher building cost and 50% higher operational cost than their conventional counterparts. Ice data based on IPCC scenario A2 The speed of the double-acting vessels decreases almost linearly with ice thickness, from 19 knots in open water to zero knots in 2.5 m ice. S2, Arctic Scenario 2 Part-year Arctic operation of a fleet of identical 6500 TEU PC4 ice-classed container vessels (bulbous bow). The container vessels with reinforced hulls and bulbous bow operating a liner service that transits the Arctic during the summer, when the ice cover is at its minimum, and uses the Suez Canal the rest of the year. Part-year Arctic operation along route 3. The sailing season in 2030, is assumed to be 100 days, and in 2050, 120 days. Shorter and longer seasons are also consider, in order to investigate the sensitivity. The vessels with ice class are assumed to have 30% higher building cost and 50% higher operational cost than their conventional counterparts. Ice data based on IPCC scenario A2 The speed of the ice-classed vessels decreases from 24 knots in open water to zero knots in 1.5 m thick ice. The hulls are reinforced according to the requirements of ice class PC4 (International Maritime Organization, IMO, 2002, 2009; International Association of Classification Societies, IACS, 2007), which is deemed sufficient to handle Arctic sea ice conditions during the summer. Table 1: Summary of the the baseline and two Arctic scenarios used in the fleet-level economic analysis Asia-Europe trade increase was assumed to be lower than that of global trade. Thus, in this study the Asia Europe trade volume was assumed to grow by 40 % from 2006 to 2030, and by 100 % from 2006 to This gives a total trade potential between the Tokyo hub and Europe of 3.9 million TEU in 2030, and 5.6 million TEU in For the modelling purposes of this study, all future Asia- Europe traffic is represented by trade between one European port, Rotterdam (R), and three Asian ports; Tokyo (T), Hong Kong (HK), and Singapore (S). Each port is a representation of a wider geographical area, and is designated as a Hub to reflect this (e.g. Tokyo hub). It is realised that although specific ports are selected for practical implementation in the model, in reality the trade volumes will be distributed more evenly between multiple ports in the selected regions. 12

13 Year Scenario Competitiveness for route S1 S2 Not competitive for any of the hubs. Competitive for the Northern (Tokyo) hub. S1 Not competitive for any of the hubs, unless bunker price above $900/tonne 2050 S2 The Northern (Tokyo) hub will be competitive. The Hong Kong hub will be competitive for optimistic estimates (i.e. large values) of bunker price and length of summer season, but the probability of encountering these parameter values for which this hub is competitive is deemed low Table 2. The competitiveness for future transit traffic along route 3 The Asia Europe cargo volumes are assumed to be split equally between the three hubs in 2030 and For each port pair (R-T, R-HK and R-S) and for each reference year (2030 and 2050) the future voyage costs for arctic transit is compared against voyage cost for Suez transit. The baseline scenario is a fleet of identical 6500 TEU container ships in a liner service via the Suez Canal. This baseline scenario is compared with two different scenarios for shipping via the Arctic: S1) All-year Arctic operation of 5000 TEU doubleacting 2 container vessels; and S2) Part-year (summer) operation of 6500 TEU PC4 ice-classed 3 container vessels. The baseline and the two Arctic scenarios are summarized 2 Double-acting vessels have a regular bulbous bow in front and an ice-breaking stern. The vessel is propelled by pod thrusters that enable the vessel to move efficiently both ahead and astern. In open water, the vessel moves as normal, but in ice the vessel turns around, using the stern for ice-breaking (see also Table 1). Note that, to date, only smaller vessels have been built using this concept, although designs exist for vessels of the size used in this study. 3 PC4 is a notation used for vessels that should be able to handle Year-round operation in thick first-year ice which may include old ice inclusions (see also Table 1). in Table 1. The voyage cost calculations for each scenario include fuel costs, explicit modelling of the effect of transiting through ice, and additional investments for ice strengthening (e.g. reinforced hull and propulsion systems). For each port pair, future cargo volumes are then assigned to the most competitive alternative, which gives the number of transits in 2030 and Table 2 summarizes some results from the analysis. For each particular hub, for a given bunker price (and in the case of scenario 2, for a given length of the summer season), the model yields a difference in cost between the Arctic scenarios and the baseline scenario. In the scenarios, the most likely future bunker prices are assumed to be $600/ tonne in 2030 and $750/tonne in In scenario 2, the most likely sailing seasons are assumed to be 100 days 4 According to the OECD ENV-Linkages model the oil price will be about 20 % higher in 2030 compared with the 2010 level, and about 50 % higher in With a current bunker price at about $500/tonne, and assuming that the oil price development is a reliable proxy for bunker price development, the 2030 bunker price is estimated to $600/tonne and the 2050 price to $750/tonne. 13

14 in 2030 and 120 days These parameters are used to evaluate the economic attractiveness of Arctic route 3 relative to the baseline. For sensitivity considerations, a wider range of values for bunker price and sailing season have also been investigated. The effect of this is also commented upon in Table 2. The results show that Arctic transit will be economically attractive for part-year container traffic from the Tokyo hub in 2030 and Of the projected total trade potential of 3.9 million TEU from the Tokyo hub in 2030, 1.4 million TEU is estimated to be transported across the Arctic in the sailing season. This amounts to a total of about 480 transit voyages across the Arctic in the summer of For 2050, the total trade potential rises to 5.6 million TEU for the Tokyo hub, with 2.5 million TEU estimated for the Arctic, giving about 850 Arctic transit passages (one-way) in the summer of The predicted amount of containers that will be transported through the Arctic corresponds to about 8 % of the total container trade between Asia and Europe in 2030, and about 10 % in The numbers of passages were then used to calculate fuel consumption and ship emissions. of global ship emissions in 2050 (Buhaug et al., 2009; Endresen et al., 2010). The model has been tested against variations in fuel price and length of sailing season, and the conclusions presented are robust with regard to these factors. Future work with the model should be extended to include variations in other input factors, such aschoice of IPCC emission scenario, future ice scenario, ship size and ship concept, performance of the vessels in ice, cost of building and operating ice class vessels, as well as possible stricter requirements on fuel quality and, therefore, higher Figure 6 shows the estimated annual fuel consumption by the fleet of container ships along Route 3 in The fuel consumption is converted to emissions using emission factors. For CO 2 this gives emissions in the Arctic of 3.7 Mt in 2030 and 5.6 Mt in Due to shorter travel time, fewer ships are needed to carry the same amount of cargo between Asia and Europe by going across the Arctic compared with the route via the Suez Canal, and the global emissions are reduced by 1.2 Mt in 2030 and by 2.9 Mt in 2050, respectively. These numbers represent reductions of roughly 0.1 % in 2030 and 0.15 % Figure 6. Aggregated fuel consumption for the needed fleet of container ships crossing the Arctic Ocean in The high fuel consumption coincides with heavy ice conditions 14

15 fuel prices on the Arctic routes than for the Suez route. Regularity issues should also be considered, as well as logistic issues like use of surplus vessels during the Arctic sailing season. It is also noted that only cost reductions are considered in this study; no allowance for potentially higher incomes, due to lower inventory-holding costs and increased productivity, has been made. The two Arctic scenarios used in this study are relatively straightforward, and are believed to represent viable alternatives. Other scenarios or concepts are conceivable. One option is to deploy ice strengthened vessels only on the Arctic Ocean, and to transfer cargo to ordinary vessels at purpose-built transhipment ports on the edge of the North Pacific and North Atlantic oceans. For this option, reduced investment in ice strengthened vessels would be countered by substantial investments in port infrastructure. All such scenarios will illustrate ways to balance parameters such as infrastructure costs, ship investment, sailing season, and ice conditions. which is less than the estimate of 1.78 Mt presented in this study, but of the same order of magnitude. However, their study is not limited to container ships and considers only fuel consumption along the NSR, whereas this study also includes the parts of the journey that lie outside NSR. The estimated CO2 emissions calculated by Corbett et al. (2010) appear to be significantly higher than presented in this study. They give total emissions from all ship traffic in 2030 and 2050, but they have also estimated the proportion that container ships represent of the total traffic. Their estimates of the CO2 emissions from Arctic container traffic in 2030 are 4.8 and 7.7 million tonnes for a business as usual and high growth scenario, respectively. For the 2050 the numbers are 12 and 26 million tonnes CO 2. These numbers are higher than presented in this study by a factor in 2030 and in The reason seems to be that Corbett et al. (2010) assume that as much as 2 % and 5 % of global seaborne trade will be shifted to the Arctic in 2030 and 2050, respectively. Comparison to other studies Several studies have tried to predict future transit shipping activities and their emissions in Arctic waters (Ragner, 2000; PAME, 2000; Brunstad et al., 2004; Dalsøren et al., 2007; PAME, 2009; Corbett et al., 2010; Khon et al., 2010; Liu and Kronbak, 2010; Paxian et al., 2010), considering different climate scenarios, regional developments, geo political issues, ship types, reference year, and output parameters. Corbett et al. (2010) and Paxian et al. (2010) are the studies most relevant for comparison with the results presented above. Paxian et al. (2010) give a range of Mt for fuel consumption in the North-East passage in 2050, 15

16 Shipping related to oil and gas activities A quarter of the world s total undiscovered petroleum resources may lie in the Arctic (USGS, 2008; Gautier et al, 2009). As part of the ArcAct Project, Peters et al. (in preparation) used estimates of unproven resources published by USGS (2008) to estimate production profiles until 2050, distributed between the hydrocarbon provinces of the Arctic. They also distributed the oil and gas export from the different Arctic regions between pipeline and ship transport. The future hydrocarbon production was estimated using the FRISBEE model (Framework of International Strategic Behaviour in Energy and Environment, see Aune et al., 2005). DNVR&I used the geographically distributed oil and gas production locations and export modes established by Peters et al. (in preparation) to estimate the ship movements and the resulting fuel consumption and emissions to air. For supply vessels, a simplified statistical approach is used to correlate the amount of fuel consumed with the amount of petroleum extracted. A moderate oil price was assumed ($80/barrel of oil equivalent (boe)). Increasing the oil price would increase production, while lowering it would reduce production (Glomsrød and Aslaksen, 2009). Figure 7 shows transhipment ports and possible transhipment routes of oil and liquefied natural gas (LNG) in 2050 as used by DNVR&I. The results indicate that 89 Mt of oil and natural gas will be transported along the northern coast of Norway in 2030 and 211 Mt in Of this, 87 Mt in 2030 and 199 Mt in 2050 will originate in Russia. These numbers concur well with those reported by the Norwegian Coastal Administration (2008) and PAME (2009). In contrast, Bambulyak and Frantzen (2007, 2009) cite projections of Mt oil per year for the next decade (i.e. before 2020). As indicated in Figure 7, oil and gas produced in the Arctic parts of North America is assumed to be exported by pipeline. This is very likely for fields in Alaska and the Canadian provinces Yukon, Northwest Territories, and Nunavut, but may be questionable for potential production in the Canadian Arctic islands. If all the oil and gas developments assumed by Peters et al.(in preparation) actually take place, total CO 2 emissions from ship transport of oil and gas production and service vessels in the Arctic will be 40 % higher than from the Arctic transit traffic in 2030 and about twice that from transit traffic in The results presented are sensitive to change in input variables such as the estimate of unproven resources, oil price, transportation mode, and fluctuating oil and gas markets. About 50 % of the projected hydrocarbon production in 2030 and 2050 will be gas, according to the results of Peters et al. (in preparation). The gas production will depend on the gas price, which is influenced by many factors. The recent prospect of shale gas development exemplifies a possible influences on gas price. Figure 7. Transhipment ports (green asterisks) and transhipment routes (black solid lines) in The orange line marks the Arctic according to the definition of the Arctic Council ( AHDRmap_gen.ai) 16

17 Challenges from increased shipping in the Arctic regions The study presented herein, based on one possible scenario for the ice conditions between 2010 and 2050, indicates that Arctic transit traffic and increased shipping related to oil and gas production may occur by 2030, and continue to increase towards Other studies state that reduced ice cover and easier export possibilities may, in addition, elevate production of other minerals and resources in the area (OF, 2010; ACIA, 2004, 2005), increase tourism, alter fishing patterns, and change community re-supply options. This raises the need to discuss the adequacy of current regulatory and governance regimes for the Arctic. Below, some concerns are described that may arise from increased shipping and petroleum related activities in the Arctic regions. Environmental aspects The shift in ship traffic implies that significant parts of emissions to air may be diverted to the Arctic from more southerly latitudes, with potential consequences for the climate, e.g. through deposition of black carbon (soot) on snow and ice, as well as local pollution, such as increased acidification and enhanced surface ozone formation. However, air pollution and climate impacts from shipping are not limited to the Arctic, and efforts to address global emissions will also benefit the Arctic. A range of emission reduction measures, such as using LNG as fuel, are available (DNV, 2009; Eide et al., 2010b). Waste handling could be an issue in the Arctic due to inadequate port facilities. Most discharges to sea and emissions to air are regulated by IMO or regional conventions in the form of upper limits. Noise from ships and other disturbances are generally not regulated, but are appearing on the IMO agenda. A main concern regarding increased shipping activities in the Arctic is the accidental spill of oil and chemicals. The level of concern has been elevated as a direct result of the blowout in the Gulf of Mexico in April 2010, but oil spills, resulting from shipping accidents, occur regularly worldwide (e.g. Prestige, Heibei Spirit, Full City). Considering the added challenges of Arctic operations, the risk of accidents may increase in these waters. Presently, there are very few ways for recovering spilled oil from icecovered waters. These factors need to be addressed in order to avoid severe ecological and economic consequences. Ship design and operation for the Arctic There are no internationally legally binding requirements for ship design or ice class specific for ships traversing the Arctic Ocean. IMO plans to issue updated voluntary Guidelines for Ships Operating in Polar Waters (IMO, 2009) that address construction provisions, as well as recommendations for equipment, operational guidelines including crew training, and environmental protection and damage control. These guidelines are updates of an earlier version (IMO, 2002), taking into account technical developments since 2002 and including provisions for the Antarctic region. They also take account of the Unified Requirements for Polar Ships of IACS (2007), which address aspects of construction for ships of Polar Class. The updated IMO guidelines are intended to be applicable to new ships with a keel-laying date on or after January 1, Safety aspects Sailing across the Arctic Ocean will require improvements in a suite of safety issues, including charting and monitoring, and control of ship movements in the Arctic (PAME, 2009). Radio and satellite communications and emergency response, including search and rescue, are currently not satisfactory. Additionally, observational networks and forecasts for weather, icing, waves, and sea ice are presently insufficient. Present standards for Escape, Evacuation and Rescue (EER) will need to be changed in order to be appropriate for the Arctic. 17

18 A short overview of shortcomings of current standards is presented by the Barents 2020 Project (2010). They include evacuation to the ice, safe havens, reduced survival time, limited possibilities for using helicopters and aircraft, need for icebreaker assistance to reach muster points in the ice, and search being hampered by darkness during part of the sailing season. The safety aspects must be solved in cooperation across national borders. An important contribution to risk reduction in the Arctic may be achieved through development and use of decision support systems. Risk-based onboard guidance to the master (Navigational Decision Assistant) to avoid excessive hull stress, collision and grounding has recently been developed (e.g. Bitner-Gregersen and Skjong, 2008; Spanos et al., 2008). These concepts should also include ice conditions. Utilization of AIS (Automatic Identification System) for ship traffic monitoring could also be considered to be used by Coastal authorities in the Arctic region to reduce risk. To enhance the effects of such shore-based ship monitoring, systems applying methods for risk-based ship traffic prioritisation can be used (Eide et al., 2006; Eide et al., 2007). Societal aspects Increased shipping and hydrocarbon activities in the Arctic may impact on the indigenous peoples in several ways. There may be some positive economic impacts from increased shipping, but Arctic residents have expressed concerns regarding the social, cultural, and environmental effects of such expansion (PAME, 2009). The potential impacts should be possible to mitigate through careful planning and effective regulation in areas with high risk. Governance IMO regulations are binding for the Arctic states, but presently there appears to be no regulations or conventions that are legally binding for all Arctic states on other areas. Bilateral, regional and sectoral regulations address fishing and offshore hydrocarbon activities, as well as impact assessments (Koivurova and Molenaar, 2010). but there is no competent body that administers such topics for the Arctic as a whole. The Arctic Council ( council.org), is basically a consensus-based and project-driven organization, and does not possess any legally binding obligations. Participation in the Arctic Council is limited to the eight Arctic states 5. Global or regional regulations that apply in the Arctic include the United Nations Convention on the Law of the Sea (UNCLOS, United Nations, 1994), the legally binding instruments SOLAS and MARPOL73/78 (IMO, 2010a), the London Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter from ships (IMO, 2010b), and the OSPAR convention that covers only the Atlantic part of the Arctic (OSPAR Commission, 1998). Thus, although the legally binding regulations and a competent body that administers these for the Arctic are missing, a framework to build on when developing the instruments already exists. Some coastal Arctic states have submitted claims to the Commission on the Limits of the Continental Shelf (CLCS) for areas beyond the 200-nautical mile limit (opened for in UNCLOS Article 76) that may, if all are accepted, leave only a small triangle on the Alaskan side of the North Pole unclaimed (VanderZwaag et al., 2008). Non-Arctic states have started to show interest in the Arctic, in particular China (Jakobson, 2010) and the European Commission (OF, 2010). 5 Eight countries are regarded as Arctic countries: Canada, Denmark (through Greenland), Finland, Iceland, Norway, Russia, Sweden, and the United States of America (USA). Of these, five countries, Canada, Denmark, Norway, Russia, and the USA, are regarded as Arctic coastal nations. 18

19 Conclusions Ice cover in Arctic is expected to continue diminishing through the 21 st century. This trend may lead to a longer navigation season, improved accessibility by ships, and increasing pressure to develop oil and gas resources in the Arctic region. DNVR&I has used a scenario based approach to consider the expanded ship traffic, as well as hydrocarbon exploration and production in the Arctic Ocean, as a result of continued global warming. The results show that in 2030 only part-year (scenario 2) traffic from the northern ports in Asia (Tokyo hub) will be competitive. In 2050, a Tokyo hub will be profitable for part-year operation (scenario 2) and may become profitable also with year-round sailing (scenario 1) for bunker prices above $900/tonne. Trans-polar shipping from central ports in Asia (Hong Kong hub) is likely to become marginally profitable only with high bunker prices and a long summer sailing season in Traffic across the Arctic from the southern ports in Asia (Singapore hub) will not be profitable due to a longer sailing route than via Suez. Using a trans-polar route may reduce global CO2 emissions from ships by roughly 0.1 % in 2030 and 0.15 % in 2030 and 2050, respectively. The environment and safety particular to Arctic operations have been identified that are associated with the expected increase of activity. It is acknowledged that in the year perspective addressed in this paper, uncertainty occurs in a number of factors (if not all) influencing the estimates derived. It is therefore suggested that multiple scenarios might be applied, thereby providing upper and lower bounds for estimates. Based on certain assumptions about hydrocarbon reserves in the Arctic and their development and an oil price of $80/boe, CO2 emissions from shipping related to oil and gas production (tankers and service vessels) in the Arctic was estimated to be 40 % higher than the CO2 emissions from Arctic transit traffic in 2030 and about twice that from transit traffic in In addition to transit shipping and shipping related to oil and gas production, increased tourism, alterations in fishing patterns, and changes in community re-supply may further raise activity levels. Certain challenges related to 19

20 Recommendations Improved model and input data will be needed to provide a more complete picture of possible scenarios for shipping and oil and gas activities in the Arctic. Examples are models that consider the whole logistics chain, including ice management, as well as weather and ice routing, and better and more detailed regional data on sea ice and metocean parameters. It has been argued that increased activity in the Arctic will result in challenges related to the environment and safety that will need to be addressed. These challenges appear solvable, provided that the regulators take action and implement the necessary safeguards, making Arctic shipping not only economically sound, but also socially and environmentally acceptable, and hence a viable option for the future. As part of such action, work on Arctic impact and risk assessments should be strengthened and intensified. The assessments should not be limited to shipping and oil and gas developments, but could also include fisheries, tourism, and extraction of other natural resources. They must include design and operational requirements with respect to safety and environment for all future activities in the Arctic, ways to reduce impacts from the various activities and improve their sustainability, as well as infrastructure aspects like satellite communication, search and rescue, weather forecasts, and spill prevention and contingency approaches. There appears to be a need for more binding regulatory and governance regimes in the Arctic. Some of the framework already exits. Making the IMO guidelines for ships operating in polar waters mandatory could be a good start. 20

21 References References are available upon request. 21

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