Pacific Maritime Magazine - Marine Business for the Operations Sector

Promise of the Arctic: New Ships, Opportunities and Challenges

 

February 1, 2020

The US Coast Guard Cutter Healy (WAGB-20) is in the ice about 715 miles north of Barrow, Alaska, with a team of about 30 scientists and engineers aboard deploying sensors and autonomous submarines to study stratified ocean dynamics and how environmental factors affect the water below the ice surface for the Office of Naval Research. Photo by NyxoLyno Cangemi courtesy of the US Coast Guard.

Polar bears and the North Pole immediately come to mind when outsiders think about the arctic, but those who do business in the region know that the arctic is so much more than this wintry scene.

It's actually home to 4 million people living across eight different countries, including the US (Alaska), Canada, Finland, Norway and Russia. It is also an economically diverse region with established industries such as trade and tourism and emerging industries such as renewable energy and technology.

"Trying to change the perception of the arctic so that people outside the region actually would see us for what we are, a region with major economic potential is one of the challenges," said Anu Fredrikson, director of the arctic Economic Council.

"I think it's worth highlighting that the arctic is a region with massive investment potential," she said, adding that the arctic has an estimated investment potential of $1 trillion.

"Those are really significant numbers," Fredrikson said. "Think of the global development and the global picture. What we see is that 2 billion people, mainly in Southeast Asia, are going to take the lead toward middle class within the next two decades. And they will need natural resources. A lot of these natural resources, about 20 percent of the global natural resources, are in the arctic. So I firmly believe that the arctic is going to gain in significance."

Created by the arctic Council five years ago, the AEC was formed to be a voice for the arctic business community and to develop ties with the pan-arctic markets and between the arctic and the global market.

arctic transport routes are being used on a larger scale. In addition to the established business areas, the blue economy and renewable energy, particularly wind power, are seen as emerging areas of economic opportunity, Fredrikson said.

The extraction of minerals also remains an important area of business in the arctic. IT and broadband development also present a business opportunity, she said.

"That is part of infrastructure development, but it is also a major business opportunity because with increased infrastructure and digital infrastructure, we gain the ability of becoming a data center hub," she said. "And we have the perfect conditions in the arctic for data center development with cool climate and an abundance of green energy. These are factors that large companies such as Facebook and Google are looking to turn to, to an increasing degree."

And while the arctic has economic potential, it could also be challenged by a looming trade war.

"Increased global protectionism can potentially hit the arctic economies hard because most of the eight arctic economies are very trade dependent, and many of our regions produce the same goods, so we don't really do so much trade with each other," Fredrikson said. "If our dependency on having market access to the global market is restricted, then it's going to hit the arctic economies hard."

Promoting the arctic is a priority for the AEC, which has taken over the ownership of the arctic Investment Protocol originally created in 2015 by the World Economic Forum. The Protocol spells out six principles that outline how one should go about investing or doing business in the arctic, including building resilient societies locally, respecting and including the local community and indigenous communities in decision making and pursuing measures to protect the environment, Fredrikson said.

"What we hope to gain with the arctic Investment Protocol is to build a broad coalition of support for these principles. The arctic Investment Protocol can provide guidance and a checklist for how to approach investments in the arctic in a sustainable manner, thus helping both new stakeholders entering the region but also helping secure local involvement and say in the process."

US Interests

The US Coast Guard, which has maintained a presence in the region for more than 150 years, knows all too well the economic opportunities the arctic provides on a global scale as recent arctic warming has broadened waterway access, allowing for more shipping access.

Such routes could shave transit times by as much as two weeks. For example, goods could take 24 to 25 days with a route through the arctic, while one through the Suez could take about 10 days longer.

According to the arctic Strategic Outlook put out by the US Coast Guard earlier this year, the economic value of the American arctic encompasses 1 million square miles of US territorial waters and exclusive economic zone in the arctic, $3 billion generated from Alaska's arctic seafood industry, 90 billion barrels of undiscovered area oil reserves and an estimated 30 percent of the world's undiscovered natural gas, and $1 trillion worth of lead, nickel, zinc and other rare earth minerals in the area.

The outlook, which updates the agency's 2013 arctic Strategy, acknowledges the increasing number of Chinese arctic expeditions and China's growing economic interest in the region, seeing itself as a near-arctic state.

About 40 percent of the 10 million tons of goods - such as coal, gas, grain and oil – that moved through the Northern Sea Route in 2017 either came from or were destined to ports in China, according to the outlook.

Russia is also showing more interest in the arctic, building military icebreakers and bases in the region, creating a Northern Sea Route Administration and using "high ice-class Liquefied Natural Gas (LNG) tankers built specifically to export natural gas from its Yamal LNG facility, (which) have contributed significantly to the increase in commercial shipping traffic in the Arctic," according to the outlook.

"Access to the arctic's vast energy, mineral, fisheries, and other commercial resources is growing at precisely the same time that global interests in these commodities intensifies," said US Coast Guard spokesman CWO Barry Lane.

To answer the call, the Coast Guard plans to beef up its icebreaking fleet with six new polar security cutters. The agency in April awarded a contract to VT Halter Marine Inc. of Pascagoula, Mississippi, to design and build the Coast Guard's lead polar security cutter that will be homeported in Seattle, with the option to build two more.

Cutter Healy, a 420-foot high-latitude research vessel that is homeported in Seattle, is one of the few US military surface vessels that can move in the arctic.

"The Polar Regions are no longer emerging threats but contemporary national security issues," Lane said. "As the region continues to open, and strategic competition drives more actors to look to the arctic for economic and geopolitical advantages, the demand for Coast Guard leadership and presence will continue to grow."

Arctic Tourism

The promise of the arctic is that it is a very prosperous economic region with many different economic activities, including tourism, said Edda Falk, communications manager for the Association of arctic Expedition Cruise Operators (AECO).

"Tourism has actually been in the Arctic... for over 100 years, with the first cruises to Svelbart actually carried out at the end of the 19th century," Falk said. "So you have had traditions of people visiting the arctic to learn more about and to observe nature and the arctic's natural features."

In 2016, the first large capacity cruise ship to transit the Northwest Passage, Crystal Serenity, carried 1,700 passengers, according to the US Coast Guard arctic Strategic Outlook.

AECO, whose 75 members include cruise agents, owners and operators, reported more than 30,000 expedition cruise passengers during this latest cruise season, which runs mainly between June and August.

Tourism is also becoming more popular as communities develop the sector as a supplement or alternative economic generator to other industries, such as mining, Falk said.

Interest continues to grow for arctic tourism and expedition cruise tourism and new vessels are currently being built to meet the demand, Falk said.

For example, luxury cruise line Seabourn, which operates a fleet of five modern ultra-luxury vessels and has an office in Seattle, is constructing its new expedition vessel, Seabourn Venture. The company recently announced it had completed ice model testing for the ship's PC-6 rated hull at Aker arctic in Finland and in December celebrated the keel laying in Italy.

The rating designates the ship's capability to operate in summer and fall ice conditions in Antarctica, the arctic and other global destinations, according to the company.

"We know that Seabourn Venture will deliver on the expedition experiences we're creating after seeing this series of tests completed," Robin West, vice president of Expedition Operations for Seabourn, said in a news release. "Our team is fully committed to taking luxury expedition travelers to some of the world's most sought after locations and Seabourn Venture is certainly going to be up to the task with its purpose-built design."

A group of scientists and engineers deploy an ice tethered profiler that moves up and down a cable below the ice surface and measures temperature, salinity, depth and current. Photo by NyxoLyno Cangemi courtesy of the US Coast Guard.

The company is currently booking for the first travel season aboard Seabourn Venture, which is expected to launch in June 2021, with a second unnamed ship set to launch in May 2022, according to Seabourn.

The itinerary for Seabourn Venture will focus on Northern Europe and the arctic, with destinations to the arctic regions of Greenland, Norway and Pond Inlet, Nunavut, the eastern entrance of the Northwest Passage, according to the company.

Another expedition vessel, the National Geographic Endurance, is set to launch in 2020. The ship – which has room for 126 guests in 69 cabins – will travel to Northeast Greenland, Jan Mayen island, the Northeast Passage and other destinations, according to National Geographic.

"We are expecting to see an increased capacity in carrying passengers, and probably a higher offering of these kinds of voyages," Falk said.

 
 

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