This is a
summary of an
Recent news headers of melting Arctic from the Economist
Arctic Meltdown: Arctic may be ice free by 2040 in summer
Why the fuss? An ice-free Arctic may radically change shipping routes,
Singapore will no longer be a nexus of East-West shipping.
The Arctic may be ice free earlier, by 2020.
Sea Lanes in Existing hub
and spoke shipping system
Opened up Transpolar
Route in ice-free Arctic
Europe to East Asia is
faster via Arctic.
Maritime sector is 7% of
What would a reroute of
trade routes mean?
Climate Change: The ice is melting …. But how fast?
• On average, ice cover has shrunk by 7% per year. Open water in Arctic is
increasingly rapidly in summer. Permafrost is melting over larger and larger
• By 2040, the Arctic Ocean could be virtually ice free in summer.
Arctic’s oil and gas: Where and when will they be developed?
• Huge potential (25% of world’s undiscovered reserves), and huge
uncertainties over when and who will develop them.
• Russia has the largest potential (official Russian strategy points that offshore
production will be 20% of 2020 Russian oil and gas production). More than
two-thirds of Russia’s resources are on the Arctic shelf.
• Greenland and Russian oil and gas development will provide huge
opportunities for maritime players.
Geopolitical tensions over sovereignty may intensify.
• International straits – Sea lanes within country’s 200 nm exclusive zone
considered ‘international’? Specifically Canada and US over Northwest
• Principles for drawing borders – Dispute between Norway and Russia over
resource-rich ‘disputed area’. Russia will claim all of Arctic.
• Territorial dispute – Denmark and Canada over Hans Island in Greenland ….
Control of potential oil resources driving dispute.
• Special regime – Svalbard undermines Norwegian rights to regulate fishing.
• UN Law of the Sea – Greenland pursuing independence from Denmark?
Potential Arctic Sea Routes Open up
• By 2040, the Arctic Ocean could be virtually ice free in summers. The
Transpolar Route and the Northern Sea Route along Russia offer preferred
shipping lanes. North America’s Northwest Passage is less open to shipping
due to melting patterns and is more complicated to navigate.
When does it make economic sense to go via Arctic?
• Basically, around South China Sea. Distance savings are not enough to
change global shipping patterns. Vessel construction and operating costs
(about +20%) still need to be factored in.
• Peter Schwarz’s view is SGP’s position as shipping hub not likely to be
negatively hit as Arctic route is seasonal.
North Pacific – North
Atlantic trade flows may
choose the Arctic route
over Suez via SGP.
Around South China Sea
the distance savings
between Suez and Arctic
route evens out.
Intra-Asian trade will
still buoy shipping
demand via SGP.
Maritime Sector - New Trans-shipment Hubs
• PSA International can take advantage of existing facilities in South Korea,
China and Northern Europe that will benefit from Europe-East Asia via Arctic
• PSA Singapore can also build a Northern Pacific Terminal near the Bering
Straits (below) to collect cargo on the great circle route in the Pacific for
transfer on to ice-class ships on the Arctic voyage.
• PSA has the largest international presence, but this also applies to other
SGP maritime companies.
Maritime Sector – Building ice-class vessels
Special winterization solutions will rise with boom in Arctic shipping.
• It is impossible to design vessel for optimum operation in both open water
and thick ice, cargo chains may have ship-to-ship transfer between vessels.
• Implies large investment in reloading ports and development of more
sophisticated reloading technology.
• Singapore ship-builders (and oil rig builders like Keppel) should start
acquiring skills to construct ice-class and ice-breaking vessels. Up against
Finnish, Norwegian and Russian shipyards. Start having MOUs on R&D with
them and cultivate ALL possible cooperative ventures with Arctic nations to
identify Singapore as a player in that region.
Maritime Sector – Be like London ….Flagging, training, education, insurance are
all divorced from geography
• Singapore Registry of Ships has the potential to become one the world’s
leading registries for ice-class and ice-breaking vessels.
• Singapore’s maritime education and training sector, marine insurance,
marine arbitration all present opportunities in an opening Arctic.
• Like London, a major maritime hub that has prospered despite a decline in
vessel traffic, SGP can build a critical mass of lawyers, financiers etc
catering to ice-class shipbuilders and multinational energy companies
operating in the Arctic. By NOT being an Arctic nation, we are neutral and
Business Times 31 Oct 07
How Singapore can meet the North-West Passage challenge
Businesses here should sit up and pay attention to
the global shift of balance in shipping routes - lifelines to Singapore's
strategic importance as an international maritime hub
By Han Kian Kwang