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2019 July 11

Vitaly Gvozdev: “We should trust local designers”

Ambitious programmes in virtually all segments of commercial shipbuilding have been announced in Russia. In his interview with IAA PortNews, Vitaly Gvozdev, General Director of Nordic Engineering, tells about the situation in the sphere of ship designing, production of shipboard equipment, general trends and the development plans of the company.

- Mr Gvozdev, tell about the company’s backlog of orders and shipbuilding projects you are going to participation in?

- Nordic Engineering was set up in 2016 through the transfer of technologies from a German shipbuilding holding Nordic Yards. As of today, Nordic Engineering is a Russian company specializing in designing of seagoing ships of any complexity.  

Over the two years and a half we have taken a stable position in the market. The company has won the competition for designing a 6-8MW icebreaker for FSUE Rosmorport. Also, we are currently taking part in a tender on construction of a freight and passenger ship for the service with to the Kuril Islands and Kamchatka, which is under the presidential control. It is a socially important and significant project for us. We have been thoroughly considering it for a long time, holding negotiations with the customer and the operator, studying the project details. We hope the vessel will be laid down this year and built within a couple of years to provide the Kamchatka and the Kuril residents with a comfortable way of transportation.

We also take part in projects involving other companies. For example, next year we expect to get the orders for ice-class tugboats under the programme for the development of the Northern Sea Route, which has initially been our strategy. So, we embark on auxiliary fleet projects, vessels of high ice class. Most probably hey will involve emergency rescue fleet, which is also among our targets. We have the related experience and an in-depth research – something to offer to the customer.

- What are the strategic plans for the company development?

- In general, we see our company not as just a design bureau but also as an engineering bureau in the full sense of that word. The idea is to implement any project on a turnkey basis. We have a number of customers for which such activities as fleet construction and operation are not among their core businesses. For instance, concerning grain carrying ships, some agricultural producers face the need of delivering grain to end users in Turkey and other countries. But it is difficult for cargo owners to evaluate novelty products in the shipbuilding market. Therefore, they often look for companies ready to provide a wide range of services being fully transparent not to mislead the customers. And we strive to be such a company complying with new requirements of the design market.

As for the competition, we have found a segment not occupied in Russia today. I'm not going to spill the beans but I expect it to boom in a year or two. We are going to develop our own project and have a ship built on our own and then demonstrate its operation to the customer. So, the customer will not have to conduct any research, supervise the construction or select a construction site. The main thing to inform us on what is to be transported (people, vehicles or freight), the scope and the direction of transportation. We will offer the entire logistic chain, calculate the cost of ship operation, the number of crewmembers, shuttle services, voyages, etc. We will suggest a shipyard, financing, if necessary, we will build and deliver the ship to the customer. I believe, the project will be implemented in the coming two years.

- Are there customers for such a project?

- I can refer to Rosmorport as a potential customer of our project. People working there think long-term and develop new marine business activities.  We are currently developing a project for them, fully at our own cost without attraction of any state funds. I hope, we will demonstrate it in the nearest future.

That will be a Russian ship with 95% of domestic materials and equipment, built by a domestic  shipyard. We aspire to build such a ship without involving any foreign sub-contractors.

проект буксира Нордин Инжиниринг- What other segments are promising for you? 

- Our second activity is energy services. It is being widely discussed today and there are companies offering such services but we are probably the only company providing energy services and financing for them. Such projects will also be performed on turnkey basis. A customer provides us with specifications for consumption of electric power, heat, lighting, etc. We develop project document at our own cost, select and equipment approved by a customer, arrange all works on construction, connection and supply of energy. A customer will only pay for equipment operation and maintenance within the contract term. Our income comes from energy saving. For example, a customer used to pay 10 rubles for energy consumed. With our optimization of the system the same amount of energy will cost 7 rubles. Nothing changes for a customer, it continues paying 10 rubles but 3 rubles make our income. The payoff is ensured throughout the contract term. Upon expiry of the energy service contract, all the equipment and upgraded systems come into the ownership of a customer at the minimum price. That is about power generating facilities like an energy center built within a customer’s territory with turbines running on gas (one of the cheapest sources of energy in Russia) and supplying electricity and heat.

We see quite an extensive market in this segment and I think that in five-six years it will be estimated at more than RUB 20 billion per year.  

It is relatively young activities launched in our company in the end of 2018. By today, we have a number of partners appreciating its efficiency. Electricity and heat rates increase in Russia from year to year while customers can be fully self-sufficient. Those are sophisticated projects requiring high qualification of engineers but we believe it is something that makes them promising ones, perhaps. We are in negotiations now and I expect the first contract to be signed in a couple of weeks.

- In this context, what is your opinion about the prospects of such energy centers in Russian ports to supply power to ships? Such on-shore centers of electricity supply are increasingly popular in foreign ports since they let reduce harmful emissions.

- Certainly, there are such prospects but Russian legislation on seaports and port facilities has not optimized it for implementation. As of today, we see a trend towards using liquefied natural gas as an alternative fuel but, in our opinion, it is necessary to introduce considerable changes into the regulatory framework particularly in the part related to safety in ports and adjacent areas. I think, it is too early to speak about large-scale implementation of alternative energy projects in Russian ports today.

- Obviously, implementation of sophisticated projects requires highly-qualified personnel. What is about it in your company?

- Our team consists of professionals with extensive experience. Today, it numbers 20 staff members and we also bring appropriate expertise. I do not favor too rapid development and expanding the staff to number 100-200 members. We are more inclined to European system for fulfillment of orders and recruitment of staff. We employ services of narrow-focus companies with a good reputation in the market. That ensures optimization of our expenses being also good for order fulfillment time.

We keep in mind young people and I think that this and next year we will invite graduates and last year students of Russian universities. That brings quite a good result in three-five years: we get prepared specialists familiar with the company with their practice supervised by those they will work with. I believe we should work towards that.

- Is there a deficit of such specialists?

- As of today, the deficit of shipbuilding specialists is great. That is not about workers, that is about engineers: yes, there is a heavy deficit of them. We try to find personnel with sufficient qualification but it is quite a problem. Those with a required experience have reached a decent age and they are not prone to change their jobs. Young people should be trained but they need to have basic knowledge. Therefore, our personnel policy is the following: we are willing to teach young specialists and simultaneously attract high-class professionals.

- According to your earlier statements, you have designed a crab catching ship with a relatively low construction cost. What are you plans in this segment?

- We certainly see the prospects of building fishing ships in Russia.  As for our cab catcher design, it was made to an order. We considered a crab-boat to be a simple and multipurpose vessel with low construction cost and with nothing in excess. We applied to a number of shipyards regarding the construction cost calculation and now it will not exceed $15 million. We had studied crab-boats designs available in the market. They are mostly foreign ones. In our opinion, they are overcharged, both in terms of cost and in terms of functions. They are good in themselves but I do not understand why should the design include a gym…

We are open for a dialogue and we are ready for modernization of our design to meet specific customers’ requirements.

- You have mentioned the winning of a competition for designing 6-8 MW icebreaker. What specific features will it have?

- That will be a multipurpose icebreaker with a number of functions including icebreaker operations in ports. We are going to expand its functions so that it could fulfill both safety and commercial functions. The icebreaker customer, FSUE Rosmorport, has been successfully implementing a long-term development programme taking part in new investment projects. So we will work on optimization of this ship to make it applicable for participation in oil and gas projects through implementing safety, supply and escorting functions. That will be possible with the ship’s deck and superstructure design allowing for installation of different equipment. Equipment manufacturer now offer good modular solutions providing an opportunity if changing or expanding the ship functions. We will try to do that without exceeding the initial budget.

- Why do many customers in Russia prefer foreign designs, in your opinion? Are they easier to work with?

- I cannot agree that they are easier to work with. Actually, Russian school of designing is not as bad as everybody believes. Our foreign colleagues offer good solutions to certain challenges faced by our designers but our speciallists compete with their counterparts and offer solutions standing well above. 

There is another aspect:  construction of all seagoing vessels in Russia should be supervised by Russian Maritime Register of Shipping (RS), which, in my opinion, is among the world’s best classification societies since its rules are “written in seafarers’ blood”. Our foreign colleagues do not always comprehend the requirements set forth by RS and often follow their own standards making it more difficult for our shipbuilders and designers who have to revise the projects. So, we should just trust our designers though foreign ones have a lot to share. As for the customers, there are different situations. When it comes to fishing companies, they prefer foreign designs. Those ordering ships with high ice class opt for Russian projects.

- Among the problems of Russian shipbuilding is low content of local shipboard equipment, which is already specified at the phase of designing. Do you pay attention to this aspect in your projects?

- Yes, there is such a problem, indeed. Yet, many foreign companies establish their production facilities here. They work and we see their products in the market – that is a very positive and correct trend.

There is also much equipment not produced in Russia, neither by domestic companies nor by foreign manufactures localized in the country. The approaches to such equipment sales are different. In most cases, such companies are quite proactive. They have trade promotion offices here which conduct active monitoring of the market and offer their equipment at initial phases. As a rule, they offer thoroughly elaborated solutions. They bring their equipment drawings and demonstrate its characteristics. An engineer involved in designing of certain systems or the entire ship should have a ready solution, it is always easier. Everything is clear: the place of manufacture, the materials, the time of delivery and the final cost for the end-user is clear. I think it is something our machine builders should look into. For some reason they do not develop in this respect. Too little attention is paid to marketing, promotion of their products. They should make presentations and prove that they are the best.

- So, it is more about good marketing than about quality, isn’t it?

- Shipboard equipment of Russian origin is often comparable to its foreign counterparts, being cut above in some cases. Yet, there are systems being far from perfect. However, it is the same about foreign manufacturers: equipment can be good but expensive or be of poor quality but cheap.

- Speaking about state support measures, what is your opinion about the efficiency of RF Government’s Decree No 719 introducing amendments in the part of criteria for determining vessels’ Russian origin, including Russian project documentation? What other measures do you consider necessary?

- It is a known fact, that there are schemes to convert foreign projects into “Russian” ones: foreign companies make a part of the project and hand it over to the customer which applies to a Russian bureau that will later stamp this project as its own work. That is, certainly, a legal loophole.

As for the criteria defined to confirm Russian origin, I can say that Russian shipbuilding steel is of good quality. Unfortunately, there is little information about components. I know about a number of steps undertaken to create a unified center for import substitution and localization of shipboard equipment but insufficient information from Russian suppliers is the fact. For example, as a designer, I have no information which main engines of Russian origin could be offered to the customer. From our part, we are ready to support local manufacturers.

- You took part in the work of an initiative group on creation of a Union of Russian Shipbuilders. How far has the project on establishing that association proceeded already?

- As I understand, such an association should support Russian shipbuilders in general but, unfortunately,  the United Shipbuilding Corporation which owns the largest number of shipyards is not among the members.

In general, I think that the shipbuilding association is needed to reach out to certain officials or companies, to express certain concerns or opinions, to reach a compromise.

- To summarize, can we state that you, as a Russian company, offer an approach of foreign companies and a ready turn-key solution?

- Yes, that is our principle. When you come to a car showroom you expect to see a ready automobiles rather than a folder with technical documents. The same is with shipbuilding. Not until the customer sees the project with his own eyes will he understand what is needed. When addressing us, the customers provide us with basic information and we demonstrate how we see it. The customers are welcome to amend our decisions. The revised solutions will be properly offered then. As soon as we find a common ground regarding the ship design we are ready to sign a contract. And we do not take money from a customer before the product meets all its requirements. That is the principle of our work and I see it as a promising approach.

Interviewed by Vitaly Chernov