Executive Briefings

Reality Check: Maybe It's Just Too Costly to Do Business in Arctic

Despite high hopes for Arctic business from mining to shipping as the ice melts rapidly and temperatures rise twice as fast as the global average, few firms say the sums still make sense.

Reality Check: Maybe It's Just Too Costly to Do Business in Arctic

An oil price slump and cheaper commodities, including iron ore, together with tensions between the West and Russia over Ukraine, are adding new disincentives.

Examples of extra outlay abound. Ice-breaking tankers able to carry gas from Siberia cost $100m, or 50 percent, more than normal vessels and hundreds of millions of dollars are needed to upgrade railways serving Arctic ports.

Added to that, for many companies, winter darkness, ice and vast distances mean that Arctic investments are a non-starter.

"There is a need for a reality check by the business community," Norwegian Shipowners' Association head Sturla Henriksen told Reuters at an Arctic business conference he hosted this month in Bodoe, a Norwegian Arctic port.

Even where costs are not prohibitive, getting a loan to fund projects has been made far more difficult by uncertainty over tensions between the West and Russia, Peter Evensen, chief executive of Canadian-based Teekay LNG Partners said.

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An oil price slump and cheaper commodities, including iron ore, together with tensions between the West and Russia over Ukraine, are adding new disincentives.

Examples of extra outlay abound. Ice-breaking tankers able to carry gas from Siberia cost $100m, or 50 percent, more than normal vessels and hundreds of millions of dollars are needed to upgrade railways serving Arctic ports.

Added to that, for many companies, winter darkness, ice and vast distances mean that Arctic investments are a non-starter.

"There is a need for a reality check by the business community," Norwegian Shipowners' Association head Sturla Henriksen told Reuters at an Arctic business conference he hosted this month in Bodoe, a Norwegian Arctic port.

Even where costs are not prohibitive, getting a loan to fund projects has been made far more difficult by uncertainty over tensions between the West and Russia, Peter Evensen, chief executive of Canadian-based Teekay LNG Partners said.

Read Full Article

Reality Check: Maybe It's Just Too Costly to Do Business in Arctic