Risk Environment in Northern Sea Route Transportation Projects

Abstract

The need for defining the risk environment in the Arctic strengthens as changing ice conditions and economic opportunities drive the demand for expanding traffic volumes in Russia’s Northern Sea Route (NSR). An international commercial shipping route, the NSR is proven to cut transit time up to forty percent compared to the overflowing Suez Canal when traveling from ports in Western Europe to Southeast Asia. The NSR offers a challenging yet attractive project landscape since its opening to global logistics companies in the 1990s. A total of 27 international shipments were made and 1.35 million tons of cargo were moved in 2013. By 2020, cargo volumes shipped along the route are expected to reach 15 million tons per year. With Asian markets pursuing liquefied natural gas from global exporters and large scale exploration and production projects being developed in Northwestern Siberia, the future of the NSR is promising. Compared to other shipping routes, there are unique operational risks for NSR maritime transportation projects; these risks can significantly affect project success. Limited information exists to sufficiently describe risk exposure. This research paper identifies and describes risk factors affecting planning and execution of maritime transportation projects in the Northern Sea Route region based on a review of existing literature and interviews with subject matter experts. Findings are summarized in a descriptive narrative supported by a risk factor breakdown structure. The final project deliverables will be offered to shipping companies and Arctic research organizations to help identify and assess risks for NSR maritime transportation projects.