Main opportunities extend from marine transportation and exploitation vast natural resources to tourism. But vulnerable environment and harsh conditions may complicate the development.
11 March 2013
The global warming is making the Arctic more accessible both to local inhabitants and international operators.
Simultaneously, the climate change creates significant consequences for the sensitive environment as well as
for livelihoods of local communities. © 2013 GRID-Arendal
Arctic Development – Opportunities and Challenges
By Pauli Jumppanen
The concept of the Arctic region varies in its
usage. It is often defined as the area north of the
Arctic Circle, with the July isotherm below 10
degrees Celsius, or north of the northernmost tree
Politically, the Arctic region includes the northern
territories of the eight Arctic states: Canada,
Denmark/Greenland, Finland, Iceland, Norway,
Russia, Sweden and the United States. A part of
these territories belong to the subarctic region that
Pauli Jumppanen took the Master of Science
covers most of the northern taiga forest area and
in Civil Engineering at Helsinki University
generally locates between 50 °N and 70 °N of Technology (HUT) in 1962 and degree
of Doctor of Technology in Materials Science
in 1971. He has worked as Professor of
M Structural Mechanics at HUT, Director of oreover, the Arctic development is of growing the Structural Engineering Institute of VTT,
and as CTO and VP for oil & gas and energy
interest also to several countries not bordering the
A business of Wärtsilä Corporation. Since 2004, rctic, including China, Japan, South Korea, India he has worked as independent consultant on
and the member states of the European Union. new energy technology and business development
Most of the Arctic is covered by ice and snow for more than eight months a year, and a large part of
the region is underlain by permafrost. But the conditions vary significantly between generally
warmer coastal areas and colder and drier interior regions.
In recent years, however, the global warming has changed
the outlook on development of the Arctic region.
Rising temperatures and the melting of sea ice are making
the Arctic more accessible both to local inhabitants and
Simultaneously, the climate change creates significant
consequences for sensitive marine, coastal and onshore
ecosystems as well as for livelihoods of local communities
and of northern people.
Minimum extension of polar ice on 12 September
2012. Source: NATO
Two main economic interest in the Arctic are the development of marine transportation and
exploitation its vast offshore and on-land natural resources.
Major shipping corridors
For commercial arctic shipping, two major navigation
corridors have been considered.
The Northeast Passage, known as the Northern Sea
Route (NSR), extends from the Barents Sea to the
Bering Strait along the coast of Russia, and reduces the
shipping distance between major cities of Central
Europe and the Far East by 30 - 40 %.
The Northwest Passage (NWP) proceeds through the
straits of the Canadian Arctic Archipelago and
Greenland and creates the shortest shipping route from
the North Pacific to the North Atlantic Ocean. The
enclosed picture shows that, in reality, the both passages
include several alternative transport corridors.
The NSR was defined and officially opened for
commercial use already in 1935. Since 1950’s, both the
eastern and western part of the Route has been used for
seasonal shipping, and since 1980’s also for regular year
round shipping with the help of Russia’s nuclear
powered icebreakers. In 1997, the Finnish ice-
© AMAP2013 strengthened product tanker, Uikku, was the first
western ship to complete the voyage from Murmansk to
the Bering Strait successfully.
Due to melting of sea ice, the NSR has been free of ice several weeks in August - November since
the year 2005, apart from 2007. The period of ice-free navigation is expected to increase from
around 40 days in 2011 to more than 120 days at the end of this decade.
Moreover, the shipping season can be significantly
extended using icebreaking support. In 2012, a
record number of 46 ships, carrying 1.3 million
tons of cargo, navigated the NSR within 146 days.
The Finnish icebreakers Nordica and Fennica,
when returning from the coast of Alaska to Finland,
were the last vessels using the NSR in 2012.
Fennica in Northern Sea Route: Photo: Arctia Shipping
Some scientists predict that the entire NSR could be opened for year round commercial shipping
already by 2030. But the Arctic conditions will remain challenging and the melting of sea ice
The North West Passage, first time free of ice in 2007, may also become a significant international
shipping route over the coming decades. The first ship transporting significant cargo through the
NWP was a specially reinforced supertanker, Manhattan, in 1969, accompanied by a Canadian
icebreaker. The Finnish company, Wärtsilä, was responsible for ice reserach and management for
entire Manhattan operation.
In a short term, the NWP could be used for transporting cargo from the U.S. east coast ports to
Alaska and for servicing Canada’s northernmost communities. In longer term, however, exploitation
of oil and gas reserves of Arctic Alaska and Canada as well as of offshore Greenland should create
large scale transportation needs along several parts of the NWP.
In addition, exploitation of minerals found in the Arctic provinces and islands of Canada and in
western Greenland is likely to significantly increase the NWP shipping volumes.
Huge natural resources
Currently, some 10 % of the world oil and 25 % of the natural gas is produced in the Arctic, north of
the Polar Circle. The Russian Arctic produces some 80 % of this oil and practically all of the natural
According to the U.S. Geological Survey, the Arctic may hold up to 13 % (90 billion barrels) of the
world's undiscovered oil and as much as 30 % (48 trillion cubic meters) of its undiscovered natural
gas reserves. Those estimates do not even include so-called unconventional oil and gas resources in
shale rocks or as methane hydrate layers in the sea bottom.
In addition to abundant oil and natural gas reserves, significant volumes of different minerals, coal,
peat, timber, fish and other biological stocks are found in the Arctic region.
Furthermore, the Arctic holds one-fifth of global freshwater
reserves, and several of the world’s largest rivers, with a great
potential for hydropower construction, flow to the Arctic Ocean.
Implementation of geothermal energy, wind power and tidal
power are considered in a number of remote communities of the
Arctic forests take 8.2 % of world’s total forest area, but only
some 2 % of the global timber production comes from the areas
north of the Arctic Circle. Windmill in Finnish Lapland. Photo: VTT
Around 70 % of world’s coniferous forests locate in the subarctic areas of Russia and Canada,
which can be attained through large Arctic rivers connected to the countries northern railway and
road networks. Timber produced in the subarctic regions could then be transported to the world
market via Arctic transport corridors.
Wild marine fish catch accounts for 10 % of the world’s
total fish harvest, but overfishing is already taking
places in the Arctic sea areas.
Today, fast shrinkage of the sea ice is opening new
fishing grounds for which research-based management
measures should be soon prepared.
Subarctic river transport. © Ioan Alexandru Todor
Economic drivers and viability
Sustainability and economic viability are the basic requirements for the Arctic natural resources
Today, main drivers to Arctic economic development are exploitation of its large oil and mineral
resources and opening of Arctic transport corridors, firstly the NSR, for international commercial
Development of the NSR is one of Russia’s top priorities in the Arctic. According to President
Vladimir Putin, this will require the development of new Arctic seaports and terminals, regional
aviation systems, river transport systems, Baikal-Amur and Trans-Siberian railways and other
onshore transport connections.
The Ministry of Transport of the Russian Federation estimates that the volume of cargo transported
along the NSR will reach 40 million tons by 2020, and as much as 70 million tons by 2030. The
new Northern Sea Route Administration started operation on 28 January, this year, in Moscow.
The NSR shipping could become the first sector to achieve economies of scale in its operation. A
ship traveling from Amsterdam to Tokyo can cut the sailing distance by 35 % or, alternatively,
reduce its speed by 35 % and still arrive in Japan at the same time as a ship sailing at full speed
through the Suez Canal. The both operations would result in lower fuel consumption, significant
reduction of greenhouse gas emissions and, finally, in significant cost savings.
Despite huge natural gas reserves, oil exploration seems to be of primary interest in today’s Arctic
hydrocarbon development. This is due to high oil prices and advanced offshore drilling technologies
in contrast to low market values and high transportation costs of natural gas.
However, uncertainties are related to the profitability and timing of hydrocarbon exploitation that is
the most risky sector of the Arctic resource development. For instance, Arctic natural gas is
currently challenged by the shale gas production, notably in North America, and the Arctic oil will
have to compete with synthetic fuels and unconventional oil reserves.
Evidence of the situation is the decision to postpone the construction of the trans-Alaska gas
pipeline as well as of the Shtockman gas field in the Barents Sea.
Nevertheless, the development of condensate-rich
natural gas fields could become profitable along with
improved operational conditions and infrastructure
In the next decade, the production and liquefaction of
Arctic natural gas to be transported along the NSR
could become as important as the oil business today.
Ship consept for transporting liquefied natural gas.
Photo: Aker Arctic
Exploitation of new Arctic minerals and fish resources should also become profitable along with
global warming and improved shipping conditions.
Additional drivers to Arctic development are created by potential timber transports and trade along
the large Siberian Rivers and the NSR and by exploitation of abundant biological resources of the
Tourism is, no doubt, a viable business sector in the Arctic. Tourists began visiting the Arctic
already in the early 1800’s, and their attraction to the region is forecast to grow for several decades
Mining - from gold to rare-earth metals
Russia makes most of the Arctic mining producing 40 % of world’s palladium, 25 % of gem quality
diamonds, 10-15 % of nickel, cobalt and platinum and significant volumes of tungsten, copper,
titanium and gold in its Arctic territories. Moreover, Russia extracts 25 % of world’s industrial
diamonds, more than 10 % of apatite and close to 5 % of phosphates and vermiculate from the
Arctic Canada and Alaska produce more than 10 % of world’s gem diamonds (mainly Canada), 5-
10 % of zinc and lead as well as good amounts of silver, gold and tungsten. In addition, new
deposits of copper, nickel, platinum and antimony are being currently explored.
The Arctic regions of Scandinavia and Finland yield iron, chromium, nickel, cobalt, copper and
gold, and additional mining opportunities are currently under consideration.
In the future, Arctic minerals will have a huge exploitation
potential. Gold and other precious metals as well as diamonds
are today the most wanted due to their high market prices.
However, a special interest is now directed to rare-earth metals,
like cerium, yttrium and lanthanum, due to their high-tech
industrial applications. Outside China, rich rare-ear Oxides of rear earth metals. Photo: th metals Wikimedia Commons
deposits are found, especially, in Greenland, Arctic Canada and
the Kola Peninsula.
Tough challenges may complicate the Arctic development
Herds of reindeer and caribou are important resources for Indigenous Peoples in the Arctic. Photo: Arctic
The Arctic region is home also to hundreds of endemic species of plants and
animals, millions of migratory birds and to large number of marine
mammals. Herds of reindeer and caribou are important resources for
Indigenous Peoples’ cultures and livelihoods in the Arctic.
Should the Arctic natural resources be exploited, and which would be the terms
and conditions for the Arctic development?
For many environmental organizations, the Arctic is the last wilderness to be
preserved, while to some industry sectors, it is the last frontier rich in energy and
mineral resources to be exploited.
The eight Arctic countries, including Finland, have expressed their Arctic
development policies that highlight sustainable management and use of natural
* Adapting best scientific knowledge and low-risk technologies;
* Taking into account environmental safety measures;
* Respecting Indigenous Peoples’ rights and;
* Recognizing national security concerns.
From these perspectives, development of the Arctic region still has a long way to
Lack of infrastructure - the largest obstacle
There are political, technical and environmental obstacles which may complicate
the global Arctic development.
Political challenges are caused by territorial and maritime claims over the Arctic
sea areas, disputed rights of trespassing some parts of the transport corridors,
extended military presence in the Arctic and the lack of commonly agreed
Technical challenges arise, in general, from extreme climatic conditions that put
specific requirements for equipment, materials and construction operations.
Environmental concerns are particularly associated with prospective accidents
and pollution that may damage Arctic ecosystems and local people’s livelihoods.
The largest obstacle, however, is the lack of sufficient infrastructure to confirm
viability, economy and safety of Arctic operations.
Huge investments in infrastructure needed
Until present, a number of institutions and industrial companies have already
been working in the Arctic conducting research, developing new technologies,
constructing equipment and performing exploration and production operations.
But to fill existing gaps in the infrastructure and technology development, major
investments in the Arctic are still needed. For example, Lloyd’s, London,
estimates that the Arctic could attract as much as USD100 billion or more
investment in hydrocarbon, minerals and shipping development, only in 10 years
The infrastructure development calls, for example, new seaports and terminals,
local roads and railroads, regional airports, oil and natural gas pipelines,
icebreakers and ice-going ships, operational and ice management systems,
emergency and rescue centers, and settlements for workforce with basic supplies
As discussed earlier, Russia has already made commitment to establish
sufficient infrastructure and services for commercial shipping along the NSR.
Following this strategy, the Russian Government has decided to build three new
nuclear and three new diesel-electric icebreakers for the use of the NSR, and to
erect 10 emergency rescue centers in different locations of Russia’s Arctic.
But still, in addition, hundreds of new Arctic ships, port and terminal facilities,
equipment and services need to be constructed to meet future needs of the NSR
International cooperation necessary
Huge investments in the Arctic development necessitate international co-
operation for sharing best knowledge, acquisition new technologies and
financing major infrastructure and natural resources development projects.
An extensive program on scientific co-operation has already been launched by
the Arctic Council with more than 80 projects already being implemented.
Out of the Arctic countries, the Russian Federation has invited foreign and
transnational companies to make investments and set up joint ventures to
develop the transport systems along the NRS and to exploit newly discovered
offshore oil and natural gas fields in coastal Arctic sea areas.
Finland – a forerunner in Arctic technology
Finland has built some 60 % of
world’s icebreakers and a number of
different types of ice-going vessels to
be used both in Arctic and Antarctic
waters. Other Finnish actors have
decades of experience in Arctic
technology development in different
construction, mining, forest and
mechanical industry sectors.
A new icebreker in tests. Photo: Aker Arctic.
Finland has a long history in Arctic technology development based on its
location partly in the Arctic and partly in the subarctic climate zone.
The Baltic Sea has been used as a laboratory for developing and testing
technologies and equipment for Arctic activities. The Finnish state-owned
icebreaker Murtaja, built in 1890 in Stockholm, was the first ship navigating
the Baltic Sea in wintertime.
The icebreaker Sampo, build in 1954 by the company Wärtsilä in the Helsinki
Shipyard, was the first modern icebreaker helping the Finnish industry to
become the world leader in the icebreaker development.
Since then, Finland has designed and built some 60 % of world’s icebreakers
and a number of different types of ice-going support and cargo vessels to be
used both in Arctic and Antarctic waters. Other Finnish actors having decades
of experience and knowledge in Arctic technology development are found, for
example, in different construction, mining, forest and mechanical industry
Many of the Finnish companies and institutions have now expressed their
interests in participation, as partners or technology and service providers, in
Arctic transportation and natural resources development projects.
A major industry cluster is born around shipbuilding in Finland. Therein, the
Helsinki Shipyard and Aker Arctic Technology are the leading companies in
designing and building icebreakers, ice-strengthened support and cargo ships
as well as different types of hybrid and multipurpose vessels.
Other cluster participants produce marine power units, electrical propulsion
systems, search and rescue centers and different aids to Arctic navigation, just
a few to be mentioned.
In some 20 years ago a new
propulsion system Azipod® was
introduced in Finland. In the
system developed jointly by
Kvaerner Masa-Yards dockyards
and ABB, the variable speed
electric motor drives the fixed pitch
propeller that is in a submerged
pod that can be rotated around its
Az vertical axis to give the propulsion ipod's most important benefit is reduced fuel
consumption and CO2 emissions. Photo: ABB thrust freely to any direction.
The system improves vessel performance in ice operation. However, the most
important benefit of the system is reduced fuel consumption and CO2
Companies belonging to the Finnish Cleantech Cluster offer maritime and
environmental technologies that can be applied also to Arctic shipping,
construction and energy generation projects.
The companies’ equipment and services contain renewable-energy units,
meteorological stations, ice and weather forecast systems, environment
monitoring and data collection systems.
For example, Vaisala is a global
leader in environmental and
industrial measurement. Building
on 75 years of experience, Vaisala
provides a comprehensive range of
innovative observation and
measurement products and
Vaisala automatic weather station for demanding
m services for chosen weather-eteorological applications. Photo: Vaisala
related and industrial markets.
The company serves customers in over 150 countries.
Furthermore, the Finnish companies provide oil spill response technologies,
waste and water management systems and a number of other facilities. Many
of the equipment have already been successfully used both in Arctic and
Antarctic offshore operations, but are equally well suited also to Arctic
onshore construction, mining and hydrocarbon development projects
For instance, Lamor develops,
manufactures, and supplies best
available technology oil spill
recovery equipment and services
around the world. The company
also offers contingency planning,
risk assessments, equipment
maintenance and service coupled
Vessel for oil spill response operations. Foto: Lamor
In late 2011, Lamor delivered a vessel that will be used oil spill response
operations in the Barents Sea.
Construction of oil drilling platforms and other offshore equipment, both for
the Arctic seas and more southern waters, has been a significant activity of the
Pori Construction Yard, with participation of other Finnish shipyards, since
Today, the product portfolio of Technip Pori Yard includes fixed and floating
oil drilling and production platforms, different platform modules and
structures, offshore loading and mooring systems, flexible subsea pipelines
and a number of offshore construction services. (kuva platform)
Finnish construction companies have unique engineering resources for
building Arctic ports, terminals, settlements, roads and bridges and other
Finnish forest industry companies have almost a century long experience in
providing installations for mechanical and chemical wood processing both in
the subarctic and Arctic climate.
The companies also have extensive
experience and skills in designing
and manufacturing all basic types of
harvesting and timber production
For example, Ponsse provides forest
machines for wood harvesting. The
control system makes possible
Harvesting in a subarctic forest. Photo: Ponsse. centralized operations supporting
logistical control of the forest
machine and the whole wood
Out of many fields of Arctic research in Finland, the development low
temperature materials should be especially mentioned. Well-known Finnish
products are Arctic steels for shipbuilding and offshore & onshore
construction designed for low temperatures, down to -60°C , and large winter-
summer temperature variations. Low temperature steels are also needed to
build Arctic natural gas pipelines that may carry compressed gas at -25°C
under permafrost or at very low ambient temperatures. Other current subjects
of low temperature materials research in Finland are different metal alloys,
composites and lubricants.
Finnish companies have
become the leading designer
and manufacturer of outdoor
products and textiles for
extreme conditions or “Arctic
One should remember,
however, that local traditions
and cultures of indigenous
Arctic people offer solutions
for housing, transporting, Finnish equipment and clothing (Halti etc.) on the North Pole
ea “Huurre Expedition” in 1984. Photo: Markku Lepolating, clothing and for other
means of living in the Arctic
which may work better than
latest technologies and newly
Finland updates its Arctic strategy
Russia approves Arctic development program
Arctic states strengthen joint work to protect region
EU Arctic Information Centre to become a reality
Arctic - an opportunity for Finnish-Russian cooperation