Monday, August 1, 2011

Russia Arctic Route to Rival Suez May Aid Sovcomflot IPO: Freight Markets

Russia plans to revive a Soviet-era Arctic sea passage to service energy projects and provide a shorter supply route to Asia for carriers such as OAO Sovcomflot as the shipping line prepares for an initial share sale this year.
Opening the northern sea route may allow state-owned Sovcomflot to speed natural-gas deliveries to China and win cargoes between Europe and Asia by offering a quicker alternative to the Suez Canal.
"If Russia gives the green light to develop this as a full commercial transit route, it would make Sovcomflot's whole investment case completely different," said Chris Weafer, Chief strategist at ING Bank NV in Moscow. "It would make it more attractive to potential investors."
Sovcomflot, along with companies such as OAO Novatek, is sending test cargoes via the Arctic route, which Prime Minister Vladimir Putin has vowed to transform into a year-round passage. To make it work, Russia must revamp ports, install rescue systems and build icebreakers for as much as 30 billion rubles ($1.1 billion) each to provide safe passage for tankers.
The northern sea route dates to 1932, when the Soviet Union sent the first vessel from Arkhangelsk to the Bering Strait. The route, open from July to November, is about a third shorter than the almost 13,000-mile journey from Rotterdam to Yokohama via the Suez Canal, saving time and fuel.
It also attract carriers seeking to avoid pirates in the waters of the East Africa and "Arab Spring" revolutions in the region around the Egyptian waterway.

No comments: