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Northern Latitudinal Railway to push development of Arctic sea ports — experts

December 14, 2017, 15:26 UTC+3 MOSCOW

The Northern Latitudinal Railway is a railroad of 707 kilometers, which will connect the Northern and Sverdlov railways and which will serve cargo from deposits in Yamal’s north

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MOSCOW, December 13. /TASS/. Construction of the Northern Latitudinal Railway (NLR) in the Yamalo-Nenets Autonomous region will favor further production of hydrocarbons in the Russian northern regions, will build up the country’s positions in the Arctic and will speed up development of the Northern Sea Route’s infrastructures, experts told TASS.

The Northern Latitudinal Railway is a railroad of 707 kilometers, which will connect the Northern and Sverdlov railways and which will serve cargo from deposits in Yamal’s north. The new railway will be a transport solution for Yamal, where people cannot have access to the peninsula’s northwestern part or to Salekhard. The project is due to begin in 2018. Experts say the project’s cost is more than 200 billion rubles ($3.41 billion)

Russia’s President Vladimir Putin earlier stressed importance of major infrastructure projects, which will structure space for the Russian economy’s long-term development. The president pointed to the NLR project, which will cut delivery time to West Siberia and will give a new impetus to development of the Russian Arctic and the Northern Sea Route (NSR).

Major railway line of the XXI century

Experts say, NLR’s biggest advantage is Russia’s direct access to the Arctic Ocean. "The Northern Latitudinal Railway and the Northern Sea Route add to each other. The railway project will "pull" from the Russian continental part the northbound cargo and will direct it to other Arctic ports," Deputy Minister of Transport and Head of the Federal Agency for Sea and River Transport Viktor Olersky told TASS.

According to the VIS Group, a company which extends NLR to the Sabetta port, the project’s implementation will open access to the Arctic shelves, will offer the shortest year-round transit of mineral resources to markets in Europe, North America and the Asia-Pacific Region.

"The Bovanenkovo-Sabetta line will connect NLR with the Sabetta port, which will be a mighty impetus to the port’s development, for growth of its cargo turnover. Besides, the project has a certain geopolitical aspect - development of the Sabetta port opens to Russia a new route to the World Ocean, to West European countries. This is absolutely different logistics, which allows us not to use the Bosporus’ infrastructures, and thus not to depend on the changing political situations," the VIS Investment-Construction Group’s Director General Igor Snegurov told TASS.

First head of the State Duma’s natural resources’ committee Vladimir Sysoyev stressed the project would give an economic effect for decades to go. "The Northern Latitudinal Railway is the Transsib (Trans-Siberian Railway) of the XXI century. The project will offer an additional route for liquid hydrocarbons' deliveries, <…> solid raw materials from Siberia, thus involving new deposits in the country’s economy," he said.

Developing the region’s economy

According to Yamal’s Governor Dmitry Kobylkin, implementation of the project will boost the local economy. "We are getting a base for development of the richest mineral base in the region, including the Kara Sea’s shelf; we thus are getting a direct access to international export markets in Europe and the Asian-Pacific Region along the Northern Sea Route, and thus the railroad will make conditions to open high-tech processing facilities on the Yamal Peninsula," he said.

The local authorities hope NLR will favor settlement of the Arctic’s social and other problems. "We shall organize new jobs both on the railroad and in the neighboring sectors - at new deposits, development of which would be economically effective with the new railroad, and at new processing plants, which will be profitable due to the NLR," the governor said, adding work of mining and transport companies would be more profitable.

Besides, the new railway will guarantee year-round transport connection between Yamal’s main cities. "NLR will cut the distance to Russia’s European part, will make cargo transportation quicker, will optimize work of RZD (Russia’s railway giant) and will connect the region’s major settlements," the governor said. "It will be a big input in settlement of the transport problem in Yamal. Using the new railroad, people, who live in the region’s cities and villages, will have a year-round transport connection."

Concession model

Russia will use the concession model for the first time in this railroad construction. "Under this model, we shall consider interests of a wide range of the project’s participants, we shall attract private investments under good conditions and will use RZD’s most advance technical and operational solutions," the governor added.

Besides RZD, the project’s participants are Gazprom, the Russian Federation and a company, which RZD will organize specially for this construction.

"For every party, depending on form of its participation, the payback term would be different," the governor continued. "For example, for RZD it would be about ten years <…> Under the signed agreements, by 2025, the carriages will be serving about 24 million tonnes of cargo a year."

The region undertakes co-financing of the most complicated bridges, including a bridge across the Ob River. "The region will invest in the project about 8 billion rubles ($135 million)," the official said.

Investments in extending NLR - a line between Bovanenkovo and Sabetta - is 113 billion rubles ($1.93 billion), Snegurov said. "Those are own assets and borrowed money. <…> As the construction is over, the railway line’s owner would be a private partner, that is VIS TransStroy, and as the public-private partnership (PPP) agreement expires in 2036, the infrastructure would become property of the Yamalo-Nenets Autonomous Region," he said.

Sources of additional funding

Yulia Zvarykina, who was transport advisor to Russia’s representation at EU, and for five years represented the Russian Ministry of Transport, says the project’s financing may be available abroad, including in India. "In search for funding, I would suggest considering not only China, but also India, which at the international Arctic forum in Arkhangelsk expressed interest not in the Silk Road, but in the North-South communication. NLR fully fits their transport initiative," she said.

Another option, which may be used for implementation of this project, is the mechanism of infrastructure mortgage, Alexander Vorotnikov of the Russian Presidential Academy of National Economy and Public Administration said. "NLR is a complex project, and the concession requires very big financial resources, thus the PPP mechanism would be applicable here: a concession or infrastructure mortgage," he said.

According to the expert, the infrastructure mortgage mechanism would offer state guarantees, borrowed resources, and the involved parties would be able to issue bonds for additional funding.

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