The small community of Kirkenes is set to witness big changes as global warming opens up the Arctic. Can it cope with the influx of businesses keen to take advantage of its position on the Northern Sea Route?
The small Arctic town of Kirkenes on Norway’s northern coast in the county of Finnmark is one of the most remote settlements in Europe. The road from its windswept Høybuktmoen airport winds past vast glacial lakes, through an expanse of tundra and into a cluster of brightly coloured weatherboard homes and a whitewashed wooden church.
So far, so quaint. But while Kirkenes may be postcard picturesque it also has an industrious, steely work ethic. At its heart is a huge shipbuilding hall, Bergen Group Kimek, which is a hive of engineers and machinists sandblasting, refitting and painting Russian fishing boats. Further down the road, vast cranes move tonnes of twitching Arctic king crab from the shore. Over the hill, a mining facility transports iron to the local Sydvaranger Gruve smeltery and beyond. These railways and the town’s deep-sea harbour were built during a flurry of industrialisation in 1906. Today, they keep the residents busy: Kirkenes has an unemployment rate of just 1.75 per cent.
Kirkenes straddles east and west and sits at the apex of three time zones. You can tell. At the local shop Spareland on the east of the harbour you will run into groups of Russians picking up coffee and other essentials. Behind the counter the staff speak both Norwegian and Russian and a smattering of Sami and Finnish. “The people of Kirkenes have a much more international approach than a typical Norwegian,” says shipbroker Christian Brugård, who is visiting Kirkenes for the first time.
But this frenetic frontier community is in for more changes – the Barents Sea beyond its sheltered fjord is one of the most resource-rich regions in the world. According to Statoil’s exploration executive vice president, Tim Dodson, investments in north Norway’s oil and gas industry are estimated at €40bn and they are set to grow: predictions show that the Arctic may contain as much as 20 per cent of the world’s oil and gas resources. A high concentration of these are thought to be in the Barents Sea, just outside Kirkenes. Despite the environmental dangers of drilling for oil in this region many companies have set their sights. “Based on current knowledge, it is estimated with 90 per cent certainty that the area contains 175 million to 2.46 billion standard cubic metres in undiscovered recoverable oil equivalent,” says Bjørn Rasen, a member of the Norwegian Petroleum Directorate.
Kirkenes benefits from its natural architecture too. The town’s deep-sea harbour sits in one of the most protected parts of the ice-free Bøkfjorden – Finnmark’s most magnificent fjord. As interest grows in the area, it is becoming a base for companies scouting for oil. WesternGeco, one of the world’s leading geophysical services companies, recently signed a deal with Henriksen Shipping to use Kirkenes as a service port for its vessels conducting seismic surveys in the Kara Sea.
And as interest in the region builds, so does the desire to bolster the town’s transport connections. Felix Tschudi, chairman of the family-run shipping company Tschudi Group, is one of an increasing number of investors calling for the construction of railways into Kirkenes harbour. “The Arctic is a region where infrastructure is key to resource development,” he says over coffee in his office near Kirkenes’ mine. “Northern Finland has large, undeveloped mineral and metal deposits that are difficult to develop due to lack of infrastructure. The port of Kirkenes could serve as an opening for the export of raw materials in large vessels to the West and to the growing markets in the Far East via the shorter Northern Sea Route.”
The epic Northern Sea Route (nsr) is a shipping lane that skirts the Russian coast, goes through the Bering Strait and to Asia, avoiding the Suez Canal. Historically it’s been off limits except in a few months during high summer. But as global warming rapidly changes the frozen Arctic it is increasingly viable. Sergey Balmasov, head of the Center for High North Logistic’s Arctic Logistics Information Office (Arclio), says that shipping of minerals through the nsr could shave 16 days off transport times to Shanghai, 18.5 days to Busan, and 20.5 days to Yokohama. “This shows that nsr is an alternative shipping lane with savings too large to be ignored,” Balmasov says. “By using this shorter route between Europe and Asia one saves about 40 per cent of fuel costs. The only problem is that a vessel traveling through the nsr needs to be ice strengthened. But as the nsr reveals itself as a time and cost saver, more vessels are likely to be fitted for this journey.”
As the ice recedes in the Barents Sea, the frosty cross-border politics in the region are also undergoing something of a thaw. In 2010 after 40 years of negotiation an agreement between Russia and Norway (in the form of a delimitation line in the Barents Sea) gave the green light to many firms that had previously stayed away. “We have always had close relations with the Russians, even during the Cold War, and the relationship is still developing in a positive way,” says Rune Rafaelsen, general secretary of the Norwegian Barents Secretariat, who took monocle to the border zone between Russia and Norway. “I believe that this mutual trust and understanding is the reason we can have an open dialogue even on problematic issues. That our efforts resulted in the signing of a delimitation line after 40 years of negotiation is, to me, proof of that.”
Kirkenes could also benefit from another geo-political rapprochement by becoming home to an international fleet of icebreakers. The Arctic Council’s decision as to where to place its emergency response vessels for joint search, rescue and oil spill prevention is a pivotal moment for the town’s future. Many here argue that Kirkenes is perfectly placed to serve as headquarters for the multilateral fleet. “Kirkenes is the most logical place to establish a joint sar unit,” says Bjørn Gunnarsson, managing director of the Centre for High North Logistics, as he points to maps and graphics that line the walls of his office. “It could serve both the nsr and act as oil spill prevention centre for accidents in the Barents Sea.”
These developments could radically alter the fabric of this community and some worry whether it can cope. Already the infrastructure struggles to accommodate the influx. Housing is in short supply and many firms are forced to operate on a fly-in fly-out basis. But local entrepreneurs say the’re braced for the boom. Thomas Hjellestad, general manager of Thon Hotel Kirkenes, says his hotel has doubled in size since it opened in 2010. “We’re planning another 25 per cent expansion within a short period of time,” he says.
But while the Thon plays host to shipping magnates, geologists and oil speculators, it is known for its view of the Northern Lights. Many visitors make the journey here to catch a glimpse of the swirling green aurora. “We had an excellent view of the fjord from our room and saw the beautiful Northern Lights just outside the hotel,” says Angela Goh, a tourist from Kuala Lumpur. Kirkenes’ challenge is to accommodate visitors such as Goh in the boom years ahead. Its small-town character and fragile natural beauty hang in the balance.
The Arctic waters are notoriously treacherous. Drilling for oil here is even more so. After the devastating 2010 spill in the Gulf of Mexico there are heightened concerns about safety and the environmental cost to whales and other wildlife. Many speculators have been thwarted by the elements. Shell’s six-year $4.5bn programme to access oil fields off the coast of Alaska ran into problems in 2012 after equipment malfunctioned and sea ice got in the way. The company says it will recommence its activities in 2013.
Located on the shores of the Ofotfjorden just 15km away from the Swedish border, Narvik’s port ships 18 million tonnes of Swedish iron ore a year from Kiruna in Sweden. With kr200bn of investment planned before 2050 this is set to rise in the next few years. Shipments are predicted to soar to a record 33 million tonnes in 2015 and 50 million tonnes in 2020. “I’m proud of Narvik,” says mayor of Nordland County, Odd Eriksen, “I’m thrilled by its prospects.”
What’s there: Minerals
Where it is: Northeast Passage
This Russian sea and river port town in the Nenets Autonomous Okrug is famous for its high numbers of Toyota Landcruisers. That’s because salaries for the 22,000 residents are among the highest in Russia. Lukoil, Total, Naryanmarneftegaz and Rosneft are currently involved in developing the town as a centre for natural resource exploitation in the Arctic Nenets region and Russian federal government is setting up the first of 10 search and rescue bases here. New buildings include an indoor ice rink and a cultural centre.
What’s there: Oil and gas
Where it is: Northern Sea Route
The town’s Dutch Harbor was the largest fisheries port in the US by volume and value before it was surpassed in value by New Bedford, Massachusetts. Fishing is the mainstay of this community; in 2012 700 million pounds of fish and crab crossed the docks at Dutch Harbor at a value of €159m. The town’s position near the Bering Sea makes it among the top locations for a transshipment hub on the Northern Sea Route.
What’s there: Fish
Where it is: Northern Sea Route
Greenland’s average temperature has risen 4.5C in the past 15 years and while this has wreaked havoc on the traditional way of life the retreating ice shelf may mean this population of 16,000 could prosper. Just outside the capital, vast quantities of mineral lodes are being discovered and natural resources such as oil and gas are becoming accessible. Firms such as Scotland-based Cairn Energy have set up shop in Narsarsuaq. “Cairn has been operating in Greenland for five years at the invitation of the country’s government,” says Ellie Goss, Cairn’s corporate affairs manager. “We believe there is significant potential to find future resources off the coast of Greenland.”
What’s there: Oil, gas and minerals.
Sea Route: Northwest Passage