U.S. Navy inviting executives to play "shipping game"

WASHINGTON Wed Dec 8, 2010 3:09pm EST

The Canadian Coast Guard icebreaker Henry Larsen is pictured in Allen Bay in Resolute, Nunavut August 25, 2010. REUTERS/Chris Wattie

The Canadian Coast Guard icebreaker Henry Larsen is pictured in Allen Bay in Resolute, Nunavut August 25, 2010.

Credit: Reuters/Chris Wattie

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WASHINGTON (Reuters) - Executives from top U.S. companies, including Wal-Mart and Exxon, are teaming up with the U.S. Navy this week in a "gaming" exercise to study how a warming Arctic Ocean and the widening of the Panama Canal could dramatically change global shipping.

The complex two-day exercise, which begins Wednesday at the Naval War College in Newport, Rhode Island, will look at the security concerns and massive investments that may be necessary to cope with the shake up of global trade routes.

"I want people who are looking at this through a different lens," Chief of Naval Operations Admiral Gary Roughead said in an interview. He said the Navy needed industry's input to map out the broad economic, military and environmental consequences of both a wider Panama Canal and the warming Arctic.

"All too often we go crashing into these things and we haven't really thought out the problem, or we've thought out the problem only through our lens," said Roughead, who has been to the Arctic region several times, earning the honorary title of "blue noser."

Roughead said he was "floored" by the interest shown by industry. Analysts say increased commerce through the Panama Canal -- and later the Arctic Ocean -- could help companies save billions of dollars in fuel and shipping costs.

Other companies taking part in the "Global Shipping Game" include Lowe's, shipping giant Maersk, Raytheon Co, computer maker Dell, Zurich Insurance, toymaker Hasbro Inc, General Electric Co and railway operator CSX.

Port operators, academics and diplomats from Panama and Chile will also help study the two issues, which may also lead to big changes in port cities and railway traffic on land.

A $5.25 billion project to widen the Panama Canal, due to be completed in 2014, will shake up global trade routes by vastly increasing the amount of cargo that can pass through the 50-mile (80-km) link between the Atlantic and Pacific oceans.

Roughead notes that the wider canal will allow about 90 percent of global cargo ships to pass through, including 86 percent of tankers carrying liquid natural gas, compared to just 6 percent now.

Just a few years later, he says, the warming of the Arctic Ocean will open the world's fifth ocean to fishing, tourism, oil and gas drilling, and eventually commercial shipping.

"We have not seen a change like that since the end of the ice age," he told a conference last month. "It's one that will have a significant effect on trade and on prosperity."

ARCTIC SHIPPING ROUTES

A major Pentagon review released last February urged the military to reduce the risks associated with climate change, including cutting its dependence on fossil fuels.

Roughead said the Navy was working hard to develop biofuels and improve energy efficiency, but also needed to think about the impact of rising sea levels on big coastal areas and changes in the formerly frozen Arctic.

Navy scientists say commercial shippers could save 5,000 miles and lots of fuel by using sending goods from Asia to Europe via the Arctic beginning in the mid-2030s, when they expect ice-free conditions for a full month each year.

By 2050,the Arctic will likely be ice-free for two to three months, spurring even greater traffic in the region.

"We could be looking at major shipping routes going through the Arctic in just a matter of decades," Navy Oceanographer Rear Admiral David Titley told Reuters, noting the Bering Strait could become a key shipping passage in just 40 years.

"That is a huge change," he said, noting that 90 percent of world commerce was shipped by sea and one of the Navy's key missions was to safeguard U.S. economic interests.

Roughead said he hoped early attention, including this week's gaming exercise, would stave off crises later.

The game, created by war gaming experts at the college, aims to take a closer look at changing shipping patterns and identify the strategic implications of both issues.

PUSH FOR TREATY RATIFICATION

The exercise will also look at the United Nations Convention on the Law of the Sea, a treaty which defines the rights and responsibilities of nations in their use of the world's oceans. The United States abides by the treaty, but has not ratified it, despite strong pleas by Roughead and others.

"It's extraordinarily important that we as a country become party to that treaty. Otherwise we are not going to be at the table when they start talking about how this is going down," he said. Roughead said he began focusing on Arctic warming several years ago when he spent time on a submarine there and heard firsthand about changing ice conditions.

He said it would probably be about five years before the Navy needed bigger funding to prepare for the opening of the Arctic, but said it was important to understand the issues involved now to allow for better budgeting and planning later.

Decisions will eventually have to be made buying new ships to operate in the region or hardening existing ships to deal with the extreme cold of the North Pole; buying more satellites to relay communications; and related issues, he said.

Roughead said he planned to reexamine the Navy's Arctic and climate change "road maps", which were developed two years ago, this spring, using data gathered during the gaming exercise.

Investing in Arctic activities would be "really expensive" for industry initially, given the austere environment, but could also provide big rewards, he said.

"The economics are going to drive when it makes it worth somebody's while to go up there to either take advantage of the transportation or take advantage of the resources. Because they're going to go up to make money," he said.

(Reporting by Andrea Shalal-Esa)

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