Nevsky Zavod enters bunker market

The first Russian shipyard to sign an order for construction of bunkering tankers was Nevsky shipbuilding-shiprepair plant LLC (Nevsky Zavod, Leningrad region). On November 28, 2006 the yard signed a contract with Norwegian company Haugland Tankers for a series of four vessels. Oleg Firsov, Director General of Nevsky Zavod, discloses the details of this unique contract.

- Late in 2006 we signed two contracts with Haugland Tankers for two 850-dwt coastal bunkering tankers. We have also secured two options for construction of two more serial tankers for the same company. This option is to be announced in June 2007. Thus, today we speak about an order for a series of four vessels.

It is not a secret that Nevsky Zavod has not been building anything for a long period being engaged only in ship repair. So it is quite natural the customer has certain doubts about our ability to fulfill the contract. Norwegian side wishes to observe the process of designing, purchase of metal and equipment, hence the option for development of a series and complicated system of financial guarantees and warranties.

The contracts were approved by the Boards of Directors of both parties. The next step for us is to provide guarantee for advance payment acceptable for the Norwegian side since it is not our resources we invest into construction. The customer is to transfer payments in stages depending on fulfillment of construction schedule. Thus, providing money for construction, the customer wishes to have guarantees of a first-class European bank. The customer suggested it could be Commerzbank (Germany), which is a partner of Nomos-Bank (Russia). So we act via Nomos-Bank.

Late in December 2006, guarantees of Commerzbank were accepted by Sparbanken Vest (Norway). First advance payments were transferred between Christmas and New Year and immediately after New Year Nomos-Bank confirmed the receipt of payment for two tankers. That means the contract is in full force now.

- What is the first payment to be spent for?

- The first stage we need payment for is design work. Under this contract, Nevsky Zavod is to be responsible for all the stages including design. So we have ordered the development of design for the head vessels. The design is to be developed by Norwegian company Skipskonsulent based in the same city as the customer – Bergen of Norway. The designer was selected by the customer. It was one of the customer’s conditions since Skipskonsulent is familiar with both the conditions the vessels are to face and requirements of Norwegian Maritime Administration, ship owner, as well as ideology of design process. Besides, it is convenient for the customer to supervise the process in Bergen.

Skipskonsulent is to implement detailed engineering work in compliance with Bureau Veritas class. We think we are not to attract local designers as we hope to receive everything necessary for construction of these vessels from Norway.

Many of foreign customers (and I used to work with Finnish and Dutch customers) think one can count for good workshop drawings and work designs in both Russia and Ukraine (post-Soviet states) though these countries stand behind in terms of ideology which does not conform to modern requirements of bunkering market and is not able to ensure construction of ergonomic vessel meeting the requirement of all modern achievements. For example, if we speak about the hulls, today we have to use half-valve thickness (8.5 mm; 7.5 mm) – something we never had in the Soviet Union. Soviet practice of design work always implied certain reserve, thus our conception has proved to be less attractive from economic point of view.

- What are the dimensions and major characteristics of the vessel?

- The tanker is not to be very large. Its deadweight is to be about 850 tons. The vessel’s length is 47.3 meters, breadth - 10 meters, depth - 4 meters and draft – 2.85 meters. The vessel is to be equipped with double hull, 6 cargo tanks, tank cleaning system and a complete set of equipment necessary for modern bunkering tankers. The project’s specific feature is the device for electric heating of heavy fuel in cargo tanks. The speed of the vessel is to be about 8 knots. The vessel is to be equipped with a two-shaft propulsion installation. The power plant is to consist of two 500-kWt engines. The crew is to include 4 persons.

- Could you disclose the value of such a vessel?

- One vessel of the series costs about EURO 3.5 million including design cost. It is the amount we are to spend for materials, equipment, construction, testing and delivery to the customer at the yard’s piers.

- What are the terms for contract signed with Haugland Tankers?

- In spring 2007 we are to start metal cutting for the first vessel. Design work is to take the period from May till June 2007 so the first vessel is due for delivery in May 2008, the second – in June 2008. Actually, construction will take about one year for each tanker, which is normal for such vessels.

If options are open for two more vessels in summer 2007, the construction period will be the same for them – 1 year. We plan the delivery for autumn 2008.

- Is there any Russian equipment among that you are to order?

- The customer’s specifications include the maker-list of equipment needed. Actually, all the equipment is to be purchased from foreign manufactures. Supply of equipment is quite a difficult process. Today, it is not very easy to purchase main propulsion units for newbuildings. Sometimes, construction of a medium diesel engine may take up to two years. Considering high demand for such units one may have to wait for about 20 months. Besides, the prices change depending on the demand and prices for metal.

We think that considering our experience and skills we’ll be able to purchase all necessary equipment within the terms specified. Under our contract we are to select among three suppliers: Volvo-Penta, Caterpillar and Norwegian company Mancraft. However, not only the price is to influence our choice. We should also consider compatibility of the engine with the shaft line, propulsion with controllable pitch propeller and shaft generator, i.e. with the complete propulsion unit.

- You don’t purchase engines at Saint Petersburg plant Zvezda, do you?

- Even if we wanted to cooperate with Zvezda, we would purchase the engine satisfying the customer. The tanker we build is to be operated in Norway and the customer is interested in availability of spare parts and technical maintenance. Not only foreign companies but even Russian customers prefer purchasing more expensive equipment with a higher level of service.

For example, Nevsky Zavod manufactures steering gears. We have both production facilities and a test bench. But we have very little orders though we produce quite reliable engines for prices lower than those of Rolls-Royce, for example. But besides supply of the engines, Rolls-Royce guarantees certain level of services in the process of equipment maintenance. Whatever happens to your vessel in any point of the ocean Rolls-Royce is to provide a specialist, which is to come to your vessel within 24 hours in order to examine the equipment and to arrange delivery of necessary spare parts. “Such equipment is much more expensive, of course, but we risk to lose more if your unit breaks,” the customers say. “It will take you two weeks to get visa for a specialist, then it will take certain time to deliver spare parts and even more considering customs clearance …”. On the contrary, common economic space of Europe and numerous consignment warehouses with spare parts ensure prompt solution of problems with equipment produced by well-known manufacturers.

- Are you going to use Russian metal for the tankers?

- Yes, we are to use domestic metal though I am not ready to name the supplier yet. We have a number of proposals on metal supply. The specification is to be received late in February – beginning of March. Then we’ll be able to make our choice depending on market situation and profitability of proposals.

- How did the contracts for bunkering tankers change the loading of Nevsky Zavod? How does the backlog of orders look like today?

- In 2006, one of our tasks was to form a backlog of orders for the next year. As of today, the orders signed cover 75-80% of the yard’s total capacity. We still have some reserve as regards loading of our facilities. In order to ensure uninterrupted and regular operation of our plant without donations we should produce about 5 – 6 thousand tons of metal structures per year. This year, only 4 thousand tons have been secured.

From the beginning of the year we have been working on modernization of three Nevsky-type vessels owned by Lenrechport OJSC. The vessels have been already cut in halves with further separation of the parts. We prepare 12-meter long inserts for the hull in order to extend the vessels. We are to replace the vessels' bottom strake, reinforce bottom bracing of hull girder (the thickness should be 10 mm instead of 8 mm). Metal replacement of each vessel totals about 240 tons, while the hulls’ weight totals from 700 tons to 800 tons. Almost one third of the hull is to be replaced. This enormous work is to be finalized by the beginning of navigation, which starts in April 2007. We hope very much for further cooperation with Lenrechport on modernization of vessels and, perhaps, on construction of new series, which is under discussion today.

Late in 2006 we also signed a contract for construction of three multi-purpose dry cargo carriers Combi Freighter CF 3850 for Damen Bergum (Netherlands). Each vessel is to be 90 meters long and 12.5 meters wide. Such dry cargo carriers have been recently being built in Tallinn. Five vessels of this type were built there. Now Damen Bergum has decided to continue construction of the series at Nevsky Zavod. Class-design for these vessels was development in Holland while workshop drawings were made in Nikolaev (Ukraine). Metal is to be supplied late in February – beginning of March. After that we shall start metal cutting. The first of these vessels is scheduled for delivery in October 2007, the second one – in November 2007, before freeze-up. The third vessel is to be delivered in summer 2008.

These are not to be completely equipped vessels but hulls with pipes, propeller-rudder system, deck machinery, superstructure with insulation, completely painted and tested tanks. The vessels are to be tugged to Holland, where propelling engine is to be installed. It usually takes them 2.5-3 months, then they fix a plate “Made in Netherlands” and you have got a foreign vessel.

- Does Nevsky Zavod count on more orders for construction of bunkering tankers?

- We have some requests from Russian bunkering companies for tankers with a capacity of 2-3 thousand tons. So today, when we witness the second berth of our yard, mastering of construction of bunkering tankers seems to be a very good possibility for us to enter bunker market. Our Norwegian customer does not exclude extension of the series. The series may be doubled if the customer is satisfied with our work.

- Is it possible for other customers to save on construction of a vessel at Nevsky Zavod under Norwegian project?

- Yes, it is possible, though in this case other customers should pay us for the design. However, it is really cheaper compared to construction under new design.

Any customer to follow our Norwegian partner will face less risk with the possibility to shorten the construction period and to pay less for a higher quality since natural difficulties are more typical for the first vessel of the series, and you may be more confident in the result when it is the third or the forth vessel.

The demand for bunkering tankers is going to grow in the nearest future as the requirements of MARPOL Convention concerning all bunkering vessels are soon to come into effect. Double hull is to become obligatory, so all Russian bunkering tankers built 20 years ago in Bulgaria (under principle of international socialist division of labor) will have to leave the market. It means good prospect for the yards able to build bunkering tankers. As far as I know, no contracts for such vessels have been signed recently in the region of the Baltic Sea.

- Are you ready to provide services on modernization of bunkering vessels? Is it reasonable and how much is it?

- We have no requests for modernization. It is quite a difficult issue. The solution depends on many factors: technical state of a vessel, its hull and systems. Modernization implies replacement of pipes, pumps, principles of loading and discharge. I think it is more reasonable to build a new tanker.

- Is replacement of a hull not enough for modernization?

- The hull is just a skin of a living organism. It covers plenty of nerves, veins, etc. If you just add another hull it will entail the change of a vessel’s displacement and you will have to install more powerful engine corresponding to a higher resistance. Thus you will get a new vessel. So I think it is much better and cheaper to build a modern vessel compared to modernization of an old single-hull tanker.

- Are there any design organizations in Russia your plant could cooperate with in terms of bunkering tankers? Which of our designers could design such a vessel?

- I have been holding current position for just 5 months. Before that I was a director of a shipbuilding yard in Tallinn. We used to face such issues in Estonia as well. Designing is not well developed in there, so upon an order of one of our Russian customers we applied to Chernomorsudoproekt (Nikolaev, Ukraine). In Soviet period it was one of the main shipbuilding centers in the Union. Both specialists and design bureaus have been preserved there till today. They developed a design for a 2,000-dwt and 3,000-dwt vessel. However, the customers did not go further. Perhaps, it was not so urgent for them to proceed to financing of the project. Still, there were certain attempts and there is certain experience in design work.

The cost of such a tanker depends mainly on equipment needed. Under preliminary estimates, 3,000-dwt tanker will be costing about EUR 9 million. However, actual costs will be based on design and the list of equipment.

- What other orders may attract Nevsky Zavod?

- We are ready to consider projects for construction of different vessels including port ships like tug-boats. In general, we have facilities enabling us to build vessels of up to 140 meters long and up to 20 meters wide. The vessel’s launching weight should not exceed 3,000 tons.

- Do you undertake any renovation of production facilities in view of possible new contracts?

- We have a program for modernization of our yard and a corresponding investment program. In 2006, we invested RUR 48 million while in 2007 the scope of investments should not be less. The plant is changing considerably. Modernization of two covered slips is coming to the end. There are three such slips at our yard. They are 220 meters long and 42 or 48 meters wide, which is quite a comprehensive facility. We have recently purchased new freight trolleys. Today we assemble equipment at our new pipe-bending facility. We have also acquired new gas-cutting machine.

Besides, we have renovated automated line for cleaning and priming of sheets, thus we have everything necessary for cutting and bending of metal components for a vessel’s hull. Technical facilities of the yard enable us to carry out maximum equipment of the vessel within the covered slip in order to launch almost finished vessel.

I hope our activities aimed at the yard renovation will ensure complete and efficient loading of the plant’s facilities.