RZD might revisit Northern Latitudinal Railway project - paper
MOSCOW. Feb 28 (Interfax) - Russian Railways (RZD) is considering reviving the Northern Latitudinal Railway (NLR), a project to build a new railway in the northern parts of oil and gas producing regions of Western Siberia, national daily Kommersant reported on Tuesday.
The economic model for the project projects that it will cost 235.9 billion rubles, including 113 billion rubles under a concession arrangement. RZD and Gazprom are supposed to finance a number of measures.
The freight base would be 23.9 million tonnes of oil, gas and petrochemical freight, and the NLR is expected to get another 20 million tonnes from existing railways, the paper said.
RZD has formulated the model for implementing the project to build the NLR, which would run 391.3 km along the route Obskaya - Nadym - Pangody, according to a presentation obtained by the paper.
Former Deputy Transport Minister Alexei Tsydenov approved RZD's proposals for the NLR in early February, before he left this position to become leader of Buryatia, the paper cited an industry source as saying. The Transport Ministry did not comment, the paper said.
The NLR project, which has existed since 2006, is supposed to increase the accessibility of oil and gas producing regions. The project includes the construction of a railway at a cost of 113 billion rubles, including the railway portion of bridges across the Ob and Nadym rivers (the Yamalo-Nenets Autonomous District is responsible for the automobile road portions), and the modernization of existing rail lines. These are the sections of Konosha - Kotlas - Labytnangi, where traffic capacity will double by 2025 and carrying capacity will increase by four to 13 times; and Pangody - Novy Urengoi - Korotchayevo, with traffic capacity increasing from nine to 23 pairs of trains per day and carrying capacity will jump from 6.5 million to 42 million tonnes.
Freight traffic on the NLR is expected to total 23.9 million tonnes by 2025, with 20 million tonnes switched from the Trans-Siberian Railway. The project is expected to increase rail freight traffic from northern regions to ports in northwestern Russia by up to 25.6 million tonnes by 2025, and with expansion of infrastructure at approaches traffic will increase by 41 million tonnes to 165.7 million tonnes.
The NLR would carry hydrocarbons from northern fields and locally refined oil products. Most of the freight would consist of 8.3 million tonnes of gas condensate from Novatek ; natural gas liquids and polyethylene from the Novourengoisky gas chemical complex; and oil and gas condensate from Rospan, Geotransgaz and others. But the Novourengoisky complex, a Gazprom project that will cost 150 billion rubles, has not been built yet; Gazprom Pererabotka head Yury Vazhenin said in March 2016 that the launch might be later than the planned 2018.
The NLR is to be built under a concession arrangement. The concession holder would have to invest 113 billion rubles in the new railway with a recoupment period of 21 years. The modernization of existing sections of railway will cost an estimated 105 billion rubles and would be part of RZD's investment program. The project would get a capital grant of up to 30 billion rubles in 2020-2022, which is sufficient to make the project interesting for participants, RZD said.
"Discussion of the project parameters is planned at the next meeting of the priority projects committee of the board of directors," RZD said without specifying a date, the paper reported.
It is still unclear who would be a party to a concession agreement besides RZD. Gazprom will participate in the project, but in a different way, by building the Nadym-Pangody section for 17.4 billion rubles and then leasing it to the concession holder.
RZD senior vice president Vadim Mikhailov said at the end of January that an agreement with Gazprom on participation in the project is ready for signing and waiting for approval. The document has not been signed yet, RZD said. Gazprom did not comment.
The estimated net present value is 60 billion rubles with an investment of 30 billion rubles for the concession granter - Russia; 137 billion rubles for RZD; and only 9 billion rubles for the concession holder. The head of the Railway Transport Research Institute, Pavel Ivankin said that the concession holder also has the highest construction cost, at $2.8 million per km.
The NLR "could become a serious helper to northern railway route, particularly with the looming specialization of the southern route in passenger carriage," Ivankin said.
Improving the transport accessibility of northern regions will create new jobs and bring in investors, and the development of northern ports is a relevant topic right now, he said.
"The participants are creating a 'beautiful' pilot project that makes it possible to model a public-private partnership and concession arrangement on railway infrastructure," Ivankin said.
However, 90% of the freight shipped along the NLR at the initial stage will be freight that is currently shipped by a different route, he said. "This will free up infrastructure, but there is no additional volume that would fill the freed space," Ivankin said.