Raivis Veckagans: Ports of Mykolaiv: Prospective Development Territories

Raivis Veckagans 26 February 2018 11:22

The port sector in the Mykolaiv region has been seeing steady growth in cargo transshipment in the past few years. Increased investment in the region and implementation of concession and infrastructure projects will bring the ports to a new level. The "Mykolaiv Region: a Reliable Partner" forum that took place in October, which I attended at the invitation of the Mykolaiv region’s Governor Oleksii Savchenko, demonstrated not only the potential of the region, but also the principled position of the local authorities. I am sure that the local authorities’ understanding of the role of the port and their desire to participate in its life and develop it will become a key factor and the key to the success of the ports.

Therefore, I want to outline the steps that the Ukrainian Sea Ports Authority has already taken to develop the port industry in the Mykolaiv region and talk about the plans for the near future.

The Mykolaiv region’s port industry essentially consists of the Mykolaiv seaport and the Olvia seaport (formerly known as the Oktyabrsk seaport), as well as private sea terminals. The Mykolaiv seaport is the third largest port in Ukraine after the Yuzhny and Odesa seaports. The Mykolaiv seaport’s cargo turnover was 22.4 million tons in 2016, when the capacity of its terminals increased to 29.6 million tons.

The Olvia seaport also has great potential. This is why the Ministry of Infrastructure selected the seaport for a pilot concession project. The Olvia seaport’s cargo turnover totaled 6.5 million tons (including the cargo turnover of the sea terminals located in the seaport) last year while its throughput capacity was 9.5 million tons (including the throughput capacities of the private sea terminals located in the seaport).

An important component in the development of these two seaports is the development of the Dnieper-Bug Estuary canal, which connects the Black Sea to seaports, marine terminals, and shipyards in the Mykolaiv and Kherson regions, as well as to River Dnipro.

Cargo turnover: active growth

The latest data on cargo turnover in seaports during the first nine months of 2017 show a 1% increase in the entire country. However, the figure for the Mykolaiv seaport is +7% and the figure for the Olvia seaport +26%, which are much higher than the growth rates for transshipment in Ukraine in general. The investment plans in the ports provide hope that these positive trends will be maintained.

Investments: partnership between businesses and government

A number of the world's largest investors are already operating in the Mykolaiv seaport, including Bunge (United States), Cofco (China), and Arcelor (European Union). Bunge commissioned a transshipment complex behind the Mykolaiv seaport’s berths Nos. 13-14 in 2016. Investments in the complex amounted to UAH 4.96 billion. Cofco has launched operation of a complex for transshipment of grain, oilseeds, and their byproducts behind the port’s berths Nos. 1 and 2. The investment in this project was UAH 1.46 billion. Positive relations with investors and a favorable climate made it possible for the seaport to reach agreement on new development projects with Bunge in 2017. The company plans to continue the projects it has already launched and increase the Mykolaiv seaport’s capacity for export transshipment of oilseeds. This is stipulated in the relevant memorandum. During the signing of this memorandum, Ukraine’s Minister of Infrastructure Volodymyr Omelian stressed that it was easy to reach agreements with investors because Ukraine was truly open to investors and that investors were welcome in any part the country.

We have also broadened the pool of investors at the Olvia seaport. At the most recent meeting of the port’s board, which took place on September 14, LLC Yevroveshnetorg was included on the board and changes were made to the port’s development plan to take account of a plan to develop the Yevroveshnetorg sea terminal. The investor planned to launch operation of the first phase of a new, modern terminal for transshipment of agricultural products in December 2017.

In addition, the Ukrainian Sea Ports Authority and the Ministry of Infrastructure are actively working with the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) on a feasibility study for operation of the Olvia seaport as a concession.

Infrastructure: modernization and construction

Simultaneously with implementation of private investment projects, the Ukrainian Sea Ports Authority is investing in development of its own port infrastructure. At the Mykolaiv seaport, the Ukrainian Sea Ports Authority has completed the design of a new project for construction of its berth No. 8. A comprehensive government expert review of the project was performed in 2017, and the conclusion was positive. Preparatory work for commencement of construction of the berth No. 8 is underway, the design of the reconstruction of the berth No. 10 has begun, and major repair work at the berth No. 9 has begun.

An additional anchorage is also being created for ships with a draft of 10.3 meters, which will generally increase the speed of ship processing and significantly increase the volume of cargo handling at the Mykolaiv port.

In addition, various engineering and construction works are being performed constantly and routinely in ports. These include repair of asphalt concrete roads, repair of railway tracks and crossings together with complete replacement of reinforced concrete slabs, reconstruction of water-supply pipeline networks, and much more.

Dredging: nominal depths of port waters and development of the Dnieper-Bug Estuary canal

To ensure steady cargo turnover, it is very important to maintain the nominal depths of port waters and ensure safety of navigation. These are our primary obligations under the Law of Ukraine on Seaports. The Ukrainian Sea Ports Authority completed maintenance dredging of the Mykolaiv seaport in the third quarter of 2017, which involved removal of 491,000 cubic meters of soil and investment of USD 117 million.

We also dredged the Olvia seaport in 2017 to maintain the nominal depth of its waters. Dredging works were last performed in the Olvia seaport more than 10 years ago. The latest dredging work involved removal of 163,000 cubic meters of soil to bring the depth of the seaport’s operational waters to the nominal depth and ensure a draft of 10.3 meters. It is especially significant that the dredging works were performed with the Ukrainian Sea Ports Authority’s own dredging fleet (the Delta Lotsman division).

We plan to perform similar works on the approach channel to the Mykolaiv seaport (the 13th tributary of the Dnieper-Bug Estuary) in the near future. The planned dredging works will have an estimated volume of 125,000 cubic meters and a cost of UAH 29.7 million.

In addition, the most ambitious project lies ahead. It will involve reconstruction of the Dnieper-Bug Estuary canal in order to improve navigational conditions for ships around the clock. We are making efforts to hire some of the leading dredging companies with experience of implementing similar large projects to act as international consultants. We are considering several options for development of the Dnieper-Bug Estuary canal: facilitating round-the-clock, one-way movement of vessels with lengths of up to 230 meters; facilitating round-the-clock, one-way movement of vessels with lengths of up to 230 meters, together with creation of zones of divergence; facilitating round-the-clock, two-way movement of vessels, together with increase of water depths to accommodate Panamax-class vessels with drafts of up to 70,000 tons.

The dredging of the Dnieper-Bug Estuary canal, together with the work that was performed in the period of 2015-2017 to bring all navigational support facilities in the canal to the level required by regulation (including illuminating them at nights), has significantly reduced the risks of accidents among ships navigating at night. It has also allowed the drafting of amendments to the Ukrainian Ministry of Transport and Communications’ order No. 655 of 2007 entitled "On Approval of the Rules of Navigation and Pilotage of Vessels in the North-Western Part of the Black Sea, the Dnieper-Bug Estuary Canal, and Kherson Shipping Canals” (hereinafter Navigation Rules) to commence with a view to simplifying the latter.

The minister of infrastructure has already signed the order on amendment of the Navigation Rules, and it has been submitted to the other relevant ministries for approval.

Strategy: more active cooperation with local authorities

The Ukrainian Sea Ports Authority, as a state management company, strives for harmonious development of all the ports in the country, from the Mariupol port to the Reni port. Therefore, active development of the ports in the Mykolaiv region is daily work. Of course, each port has its own specific characteristics, which we take into account and clearly declare in the updated “Strategy for Development of Ports until 2038.” We will soon present it. For Mykolaiv, it is important to take account of the fact that the ports are located within the city. Therefore, they must develop simultaneously with the city, its infrastructure, and approach roads. The planning should be harmonious and involve the active participation of the local authorities. At the same time, other approach routes should not be forgotten, including inland waterways, which should be used as one of the key infrastructure for preparing shiploads. Some stevedoring companies in the Mykolaiv region are currently developing these areas of operation actively. The ports should operate in cooperation with the city like the ports of Antwerp and Rotterdam, which regularly hold exhibitions, festivals, and other activities for the cities’ residents on their territories. In Ukraine, integration of ports into the urban community, including establishment of mechanisms for financial participation of ports in development of infrastructure, is a matter for the near future.

With a number of competitive advantages, the ports of Mykolaiv will play a key role in grain logistics and development of river and sea transport in Ukraine. Reduction of port charges to 20% from January 1, 2018, and introduction of a more competitive railway tariff for delivery of goods will enhance the attractiveness of the ports to shippers.