The Arctic Ocean Is Open for Businesshttp://www.fool.com/investing/general/2012/12/06/the-arctic-ocean-is-open-for-business.aspx Dan Dzombak
December 6, 2012
The inaugural trip
The regular route between Rotterdam and Yokohama is 11.2 thousand nautical miles. The Northern Sea Route is almost 35% shorter at just 7.1 thousand nautical miles. Even with the additional costs of higher insurance and an icebreaker ship, the shorter lease of the LNG tanker more than made up for the additional costs.
A gas-trading subsidiary of Gazprom chartered the LNG shipment. The gas was produced at an LNG plant owned by Statoil ASA (NYSE: STO ) in Hammerfest, Norway. The ship left Norway on Nov. 7, and arrived in Japan on Dec. 3. It was estimated that taking the NSR saved the Ob River 20 days, a time savings of over 40%.
The trip is especially profitable as Japan has the highest natural gas prices in the world, stemming from the country's huge demand, lack of supply, and the need for all its natural gas to be shipped in.
Natural gas prices in Japan have been higher than the rest of the world since 2009, but really diverged in 2011 after the Fukushima disaster when Japan stopped using nuclear power and made up the difference with natural gas power plants.
The late trip was made possible by the record low arctic sea ice this year. The NSR has been used in the summer since 1932, if not earlier. While traffic in the region has been constant since the 1930s, traffic using the entire route has really taken off in recent years as less ice has meant a longer season.
The 2011 NSR season was longer than the 2010 NSR season by about a month, with over five times the amount of cargo shipped.
The 2012 NSR season was a record breaker. In September, sea ice in the Arctic reached a low of 3.41 million square kilometers, 50% lower than the 1979-2000 average and a record low since satellite observations of arctic ice began in 1979. The previous record was recorded on September 16, 2007, of 4.17 million square kilometers. The depressed ice levels made for a 2012 NSR season that was slightly longer than the 2011 season. As more loaded ships traversed the NSR, they brought with them a 50% rise in cargo.
Arctic scientists now speculate that the 2013 season could have an almost complete disappearance of ice on the NSR. This should lead to more ships taking the route. Companies have taken notice of the steadily improving ice conditions in the Arctic and are gearing up to take advantage of it over the next few years.