Customers are No. 1 priority

President Vladimir Putin endorsed a scheme, according to which the civil shipbuilding issues will not be exclusively in the hands of United Shipbuilding Corporation (USC) and the Ministry of Industry and Trade. The latter was blasted for poor management, and Zvezda shipbuilding project was handed over to a consortium of investors that consists of potential customers of its products.

Civil shipbuilding for civil community

We have reported that the Russian government supported an initiative of the Deputy Prime Minister Dmitry Rogozin on granting the Marine Board additional powers in the feild commercial shipbuilding.

The idea to strip the Industry and Trade Ministry and state-owned shipbuilding monopoly USC of some of their authority has taken shape at a meeting held recently and chaired by President Vladimir Putin. Vladimir Putin blamed the Ministry of Industry for ineffective handling of investor-related issues, which had led to a delay in the construction of shipbuilding complex on the base of the Far Eastern Zvezda yard.

The debate was triggered by a report of interim director of the Far Eastern Centre of Shipbuilding and Ship Repair Vladimir Tsybin, who said that the ambitious project of Zvezda shipbuilding cluster in the Far East remains stalled after a Korean investor pulled out. Earlier, USC had for the same reason canceled joint projects “Vostok-Raffles» and «Zvezda-DSME» with participation of Singapore and South Korea based companies. Apparently, the same fate befell a notorious project of a Kotlin island shipyard in St. Petersburg (New Admiralty Shipyard), which was also supposed to entice foreign investors.

Vladimir Putin said the main reason why foreign partners opted out from Russian shipyards projects was that the ministry and the government were not quite clear that without investment in Russia those countries would not be awarded orders from Russian companies.

"It's not the customers’ concern, but the task of the government and by the way, of your ministry, to organize the work in such a way as to coordinate the work, both of our customers and of potential foreign partners, with the understanding that they will not have orders, if they do not cooperate with us and not invest in the development of production in Russia”, Putin was quoted as saying, addressing to the Minister of Industry and Trade Denis Manturov. “I think that you are doing it ineffectively, not persistently, that's the whole point!".

In the end, the meeting endorsed a proposal of Dmitry Rogozin on the transfer of Zvezda shipbuilding complex to a consortium of investors representing major customers of vessels with Rosneft as an anchor investor and Gazprombank as a financial institution. Russian president put in a good word for USC and requested to include the Corp. in the list.

Dennis Manturov proposed to hand over to the consortium two enterprises, Khabarovsk and Amursky shipyards (of USC), currently executing Russian Navy contracts. But Deputy Prime Minister Dmitry Rogozin and President of Rosneft Igor Sechin both were against such a plan and the assets remained in the hands of USC provided they will be ensured cooperation with Zvezda.
Vladimir Tsybin noted that initially the problem in the Zvezda project progress was that the government had not approved the concept of its construction. There was neither timetable for its implementation nor the financial scheme of the project. Denis Manturov retorted that those issues are not subject to the government’s approval adding that final decision on such matters is to be approved by the Board of Directors of USC.

Besides, Mr. Tsibin told the meeting about phases of the Zvezda project implementation. Today, the first phase includes the construction of the hall of manufacturing workshops, of paint shop and fitting-out berth. Once the first phase completed (deadline – December 2015, commissioning – Q1 ’16), fabrication and assembly of heavy sections weighing up to 145 tonnes will commence.  The second phase involves the construction of a dry dock and a workshop for outfitting ship’s sections, to build 300,000dwt vessels. The third phase includes the construction of another dry dock and outfitting workshops for construction of offshore facilities, production platforms. The last two phases are scheduled for completion for 2018.

All these terms have been agreed and adjusted to the plans of key customers, Gazprom, Rosneft, Novatek and SCF Group so as to ensure the construction of about 115 ships, primarily designed to serve the offshore oil and gas sector and hydrocarbons transport.

Putin also slammed customers, shipping companies. "Russian customers should bear in mind that with all things being equal they must place orders with domestic shipyards, and not to secure jobs and tax base abroad. Do not forget where you work," Russian President said.

Mr. Putin has stressed that Russian shipbuilders should implement serial production of ships. This could reduce the time and cost of construction and improve the quality of after-sale service, to commission outfitted repair docks that would be able to perform repair and maintenance of sophisticated products.

The Ministry of Industry supported a proposal of the Union "National Chamber of Shipping" to introduce some incentives for Russian-made shipbuilding products: such as scrapping funds or grants. The Ministry head said that the state program of shipbuilding development adopted at the end of 2012 provides for formation of scrapping funds for different groups of vessels, like small vessels, fishing boats, passenger and inland ships. "The incentives come into effect as from 2021, but I think if our customers are ready to place scrap orders with domestic shipyards we will agree to bring the date forward," the official said.

Vitaly Chernov.