OSK challenges

Dmitry Rogozin says it is necessary to exercise direct state control over the companies of the United Shipbuilding Corporation (OSK). Against this background, Finland, on the contrary, is getting rid of shipbuilding assets. The only project among OSK major ambitions being in progress today is that in the Bolshoy Kamen Bay. However, it is behind the schedule.

The development of the United Shipbuilding Corporation (OSK) from the date of its foundation is characterized by personnel reshuffles and announcements of ambitious projects the only of which being presently implemented is the creation of a shipbuilding complex on the basis of Far Eastern Shipyard Zvezda in Bolshoy Kamen Bay.

When Dmitry Rogozin, Deputy Chairman of the Government, announced the disruption of the project deadlines at the meeting on shipbuilding problems held last month in Astrakhan, a rumour about possible dismissal of OSK President Andrey Dyachkov has gone abroad. 

According to Rogozin, the project implementation report provided by OSK did not reveal the fact of schedule delay. “Does this report contain anything revealing the problem of delay in phases 1, 2, 3, 4 of the new shipbuilding potential development in the Far East? At least anything? Or 10-month schedule delay — is it disclosed here or not?” — that was a rhetorical question of Dmitry Rogozin.

According to the official information of the Far East Shipbuilding and Shiprepair Center of OSK, the new complex will produce tankers with displacement of up to 350,000 tonnes, gas carriers, ice-class vessels, specialized vessels, off-shore platform elements and other marine facilities.  General Designer is Shipbuilding & Shiprepair Technology Center OJSC, technological consultant - IMG Ingenieurtechnik und Maschinenbau GmbH (Germany).

The project is to be implemented in 4 phases till 2019. The first phase implies the construction of hull facilities building and paintshops, the second – open outfitting heavy slip with outfitting shops, the third – dry dock with grounds and berths as well as workshops and dry dock in Mysovoi village. The last phase implies the construction of a shipyard in Pyati Okhotnikov Bay. It is to be focused on implementation of orders related to the development of Shtokman gas field and Yamal fields.

According to Far East Shipbuilding and Shiprepair Center of OSK, the hull facilities building and paintshops are already built and the production is to commence in 2013.

“There are no doubts about the delivery – a lot has been done,” FESSC press center cites Victor Ishayev, the Minister of the Far Eastern Region Development, as saying in February 2013. Upon the operating second and third phases the shipyard will be able to manufacture vessel structures up to 300 tonnes and vessels with launching weight of up to 13,000 tonnes.

Today, all large tankers are being built mainly in S. Korea. Meanwhile, the launch of Shtokman project is postpone indefinitely. As for Yamal-LNG project, which is supposed to become operational from 2016, there is a plan to build 16 gas carriers through a corresponding tender. It should be noted that Yamal-LNG is a project being implemented by private investors (like Sakhalin off-shore projects), therefore the supplier of gas carriers will be most probably selected with respect to price/quality/execution speed ratio. We are not sure that Russian complex will be ahead of the leading productions, like those of S. Korea, in terms of the above parameters. The more so, as OSK attempts to attract foreign partners to their project, in particular S. Korean corporation DSME, have failed.

Meanwhile, Dmitry Rogozin told OSK management to raise its participation in all industry-focused enterprises to control stakes.

“Everything should be subject to direct state will. The state is to have a possibility of direct control over the shares in these joint stock companies. (It should have) over 50% (of shares) to control appointment of the Board of Directors, influence their decisions”, central media quote Dmitry Rogozin.

Meanwhile, Russian neighbor – Finland – does not seem to have rosy prospects when it comes to profitability of shipbuilding companies. The strategy pursued here is quite the opposite – the state rejects participation in shipyards’ assets. According to Finnish Minister for International Development Heidi Hautala, who is in charge of state enterprises, Finland “should not take on the role of main shareholder in the ship building business – this is the mindset of a bygone era”. She said that if state decides to buy part of STX shares it will have to sell the shares of other companies.  

“The company should find an industrial investor who would actively work to ensure the firm’s future. If such an investor is found the state will eye the participation in saving STX,” the Minister said. 

In this context we’d like to note that OSK and STX are container-owners of the Finland-based Arctech Helsinki Shipyard. Media even discussed the idea of STX acquisition by OSK.

The strivings of Russian Government to intensify the direct control over shipbuilding can be explained by a focus on partial revival of soviet industrial model with a strong emphasis on defense industry complex. The state officials have recently spoken a lot about the need to build-up naval forces, in particular, in the Southern Basin where the Black Sea Fleet is far behind state-of-the-art ships of the Turkish fleet, not to mention US sixth fleet. To match potential adversary in this region Russia will have to build new ships with heightened rates which is impossible in Russia without direct state control over the industry development.

Nevertheless, Russian experience related to OSK operation proved that the state corporation was excessively dedicated to ill-considered plans and projects. On the other hand, it demonstrated its efficiency when rescuing companies collapsing because of the financial problems of their private owners. Will Russia embark upon a course of building a conventional administrative-command system or follow the golden mean though attracting private investors with state support and control over their activities? There is still no definite answer to this question after 7 years from the date of OSK foundation.

Vitaly Chernov