DP World in quest for the Northeast Passage

The Russians believe that global warming presents the chance for a permanent route to be created that will challenge the Suez Canal as the key gateway between East and West. (Shutterstock)
Updated 21 July 2019

DP World in quest for the Northeast Passage

  • UAE ports group chairman Sultan bin Sulayem explains the commercial opportunities that global warming is presenting

DUBAI: The causes and consequences of climate change are among the most controversial issues in the world today. But where some analysts see a threat to global stability, even a challenge to human well-being on the planet, some businessmen see an opportunity.

Last month in Saint Petersburg, Sultan Ahmed bin Sulayem, chairman and chief executive of the UAE ports and logistics company DP World, announced a partnership with three leading Russian companies that could resolve one of the biggest challenges facing global commerce: The establishment of a permanent maritime sea route from Europe to Asia in the Arctic.
The Northern Sea Route (NSR), as the Russians call it, is the latest name for what western Europeans for centuries called the Northeast Passage. However, repeated attempts to open a viable maritime route were frustrated because of the ice and freezing temperatures that dominate that part of the world for much of the year.
With global warming, the Russians believe that the time has come to create a permanent route that will challenge the Suez Canal as the key gateway between East and West — and they have called in Arab maritime skills to help.
Bin Sulayem told Arab News: “Time is money in business and the route could cut travel time substantially more than traditional trade arteries for cargo owners in the Far East wanting to connect with Europe, coupled with benefits to the Russian economy. We need to explore the opportunities that the route would bring with our partners, and that was the purpose of the announcement.”
The Russians are represented by the country’s Direct Investment Fund (RDIF), which has done a number of deals with partners in Saudi Arabia and the UAE. The other Russian participants are Rosatom, the country’s atomic energy agency, which operates the nuclear-powered ships that will ply the route, and Norilsk Nickel, the mining and commodities company that is already in business in Russia’s far north and which hopes to exploit the region’s resources further once the NSR is fully functioning.
As the only non-Russian member of the consortium that is examining the feasibility of the route, DP World was something of a surprise ingredient. It is one of the leading ports operators in the world, operating from its base at Jebel Ali in the Arabian Gulf — the biggest port between Singapore and Rotterdam. But virtually all its rapid expansion over the past 15 years has taken place in warm and temperate waters.
Bin Sulayem seems to be relishing the challenge of working in the Arctic. “Our expertise is global and our footprint in over 45 countries means we have experience of all types of climates from Europe to Canada, from South America to Asia.
“I am a firm believer in opportunities that arise from any project and focus on solutions to challenges — extreme temperatures and ice flows have to be factored in and we will see what answers there are when our teams get together in the working group,” he said.
DP World, which has long experience in setting up and operating port facilities, would be a natural choice to develop the string of maritime hubs along Russia’s Arctic coast that is needed to service the route.

FASTFACT

11 days - Maritime experts estimate that the journey from South Korea to Europe, currently around 34 days via Suez, would be cut by 11 days to 23 days on the Northern Sea Route.

The potential prize if DP World and its Russian partners overcome the challenge is big. Maritime experts estimate that the journey from South Korea to Europe, currently around 34 days via Suez, would be cut to 23 days on the NSR, and that the route would be specially suited for transportation of commodities and energy products.
The development of the NSR does pose a danger to the delicate eco-system of the Arctic region, already under threat from global warning that has seen the ice sheet shrink dramatically in the past two decades.
Bin Sulayem says that understanding the effects on the Arctic environment is very important and will be a central part of the feasibility study currently under way.
“Environmental impact will be a key feature of any due diligence. The actual routes in question will be more adjacent to the Russian coastline at this stage,” he said.
But the Russians believe the strategic commercial logic of the Arctic route are worth the risk. Kirill Dmitriev, the chief executive of the RDIF, told Arab News when the deal was first unveiled: “Because of global warming, there are some things happening that open some opportunities. Russia has this frozen coast all of the seasons. Now it’s opening up and it’s possible to navigate for nine months. When you have special ships you can actually have 12 months navigation. That could cut the length of travel for many ships by half. So that’s a huge opportunity to reduce time of delivery, reduce costs of delivery.”
There are geopolitical factors at play, too, with many countries claiming sovereignty in the Arctic region. China — which would be a major beneficiary of the route — has already invested heavily in facilities in the region.
“This is a matter for governments. We are working with our Russian partners to examine the trade and business opportunities,” bin Sulayem said. The partners agreed to set up a working group to conduct an analysis of the project and report back in six months, when delicate financial calculations will have to be made about the extent of cash commitment to the new route.
“Each of the partners has expertise in their own sector. As a global trade enabler our experience of operating ports and other logistics assets around the world will play a major role in the exploration of the commercial options as part of the study,” bin Sulayem said.
The NSR agreement is another sign of increasing commercial ties between Russia and the Middle East. DP World is already committed to investment in Russian logistics infrastructure with the RDIF. Saudi Arabia, mainly via the Public Investment Fund, has also invested in Russian infrastructure and energy-related projects.

 


Oil prices surge after attacks hit Saudi output

Updated 16 September 2019

Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.