Yamal is making tracks for the Arctic

11.09.2012 — Analysis

In November 2012, the government of Russia will have a chance to see the business plan for the construction of the Northern Latitudinal Railway. This rail line, first proposed 100 yaers ago, will create the most direct transit route for extracting hydrocarbons from deposits within the Arctic circle. In the future, the rail tracks will travel as far as the Sabetta seaport, the construction of which began this summer on the Yamal Peninsula. Experts told the columnist for RusBusinessNews that the railroad will be in high demand and that its construction will significantly speed up development in one of the key regions of Russia.

The Northern Latitudinal Railway (Obskaya - Salekhard - Nadym - Pangody - Novy Urengoy - Korotchaevo), which will stretch for 707 kilometers and cost 154 billion rubles, is primarily intended to transport hydrocarbons from deposits in the Urengoy-Yamburg district to ports in the northwest. Experts estimate that this route will be almost 1,000 km shorter than going through Surgut and Tyumen. In addition, it will eventually link the transportation corridor from the deposits in Yamal and the Krasnoyarsk region to the port in Sabetta, next door to where NOVATEK, OJSC and the French firm Total are planning to build a plant to liquefy natural gas. They expect the first 5 million tons of LNG to be shipped to consumers in 2016. Maksim Sokolov, Russian minister of transportation, predicts that in two years 16 million tons of LNG will be exported.

Dmitry Kobylkin, governor of the Yamalo-Nenets Autonomous District, is confident that extending the railroad to Sabetta will open the path to the Northern Sea Route for a huge quantity of goods that are currently shipped to Europe and Asia by a more roundabout route. "The Yamal Peninsula and its neighboring regions possess enormous reserves," he noted. "We're already sending almost 2 million tons of freight by sea. The Northern Latitudinal Railway will make it possible to increase the amount of goods that pass through the Northern Sea Route to 60 million tons by 2030".

The plans are for the financing of the construction of the railroad from Obskaya to Korotchaevo to be shared equally. Russian Railways, OJSC will contribute 22 billion rubles to build the section running from Pangody to Korotchaevo, and Gazprom, OJSC will spend 15 billion rubles to complete the section from Nadym to Pangody. Czech banks are prepared to provide almost 2 billion euros to construct the main section from Salekhard to Nadym, as well to build two overpasses across the Ob and Nadim rivers. The Yamalo-Nenets Autonomous District will help finance the first bridge. The Yamal Railway Company, which was created as a partnership between the Corporation for Development, OJSC, Russian Railways, OJSC, and Gazprom, OJSC, will distribute the funds. A group of experts, led by Dmitry Kobylkin, is currently weighing the options for raising funds and putting the project into operation.

Maksim Feylo, head of the department for investment planning and project assessment at Giprotranstei, told RusBusinessNews that specialists are currently developing a transportation and financial model that will be suitable for all the participants in the project.

Aleksei Bezborodov, CEO of the InfraNews agency, claims that there is no such thing as an unprofitable railroad - the only question is how to utilize them. Mr. Bezborodov has no doubt that the Northern Latitudinal Railway will pay for itself - it will transport over 20 million tons of just hydrocarbons every year, in addition to construction materials and other products. He is convinced that the latitudinal track should connect with another, meridional rail line, "Since we're not making iPhones, let's at least mine hydrocarbons and ship them to developed countries via the shortest route".

Sofiya Katkova, project manager at Morstroytechnology, LLC, thinks it's fine even if the Northern Latitudinal Railway isn't able to transport 20 million tons in its first year. "Let it carry 5 million, or even 1 million. The main thing isn't how much cargo it can transport at first - what's important is that a rail line that we cannot live without is under construction." According to this expert, Russia's railway density cannot be compared even to that of the former Soviet republics. There's a big problem with transportation infrastructure within the Arctic Circle, where most of the country's resources are found. This is why laying down tracks to be able to reach the sources of raw materials is not just a business project, but also a question of the country's strategic development.

Sofiya Katkova regrets that the excellent idea to pave a transportation corridor along the ridge of the Ural Mountains from the Polunochnaya station to Obskaya station never came to fruition. Therefore, for the latitudinal rail line to converge with another, meridional track would be the ideal solution. This new corridor would make it possible to link the deposits in the western part of the Yamalo-Nenets Autonomous District with those in the east. The construction of a branch line to Sabetta will give further impetus to the development of transportation infrastructure within the Arctic Circle. The meridional and latitudinal lines will complement each other in an organic way.

Dmitry Kobylkin, governor of the Yamalo-Nenets Autonomous District, believes that on the whole, linking the Northern Latitudinal Railway to Sabetta is essential for the development of the Russian Arctic. This arterial line will connect the country's biggest northern ports to both onshore and offshore deposits. In addition to new jobs and tax revenue, the region will be able to develop new non-oil-related industries. Obviously this will increase the flow of investment into cultivating the northern territories.

The project to develop the Arctic port in Sabetta was presented to Russian President Vladimir Putin during the head of state's visit to Yamal in September 2012. At that time, Dmitry Kobylkin noted that the new port will be able to meet the needs of many of the federal regions for shipping via the Northern Sea Route. "The approach to the Northern Sea Route is a very important component of this. We envision a role for the new port of Sabetta that is much more than simply a transit point for nothing but LNG. Sabetta can be used for all kinds of shipping and can serve the export needs of the neighboring regions. The project includes these types of development options for the port," noted the governor of the Yamalo-Nenets Autonomous District.

Vladimir Terletsky