Sharing chickens before they hatch
USC and the consortium headed by Rosneft are likely to compete in construction of large capacity vessels – both are involved in projects to become operational from 2016-18. Foreign shipbuilders are to be sidelined with prohibitive measures being prepared by RF Government. The only question is about the demand for such ships amid low energy prices.
As it is known, a consortium established by Rosneft and Gazprombank implement the project on construction of Shipbuilding Complex Zvezda in Bolshoi Kamen (Primorsky Territory). Zvezda is supposed to consolidate oil and gas companies’ orders for ships and marine facilities required under offshore projects.
According to Andrei Dutov, Deputy Minister of Industry and Trade, who spoke at the meeting of RF Government’s Marine Board held in Moscow on September 8, 2015, the project’s total value - RUB 145.5 bln including RUB 60 bln to be allocated by Rosneftegaz (primary shareholder of Rosneft, 100% federally owned), RUB 3 bln to be provided for subsidizing of interest rates, with the rest to be covered by a consortium of investors. Taking into consideration that Rosneft and Gazprom are state companies, the bulk of the financial load under the project falls on the state.
The first phase, which is already under construction, is to be completed by 2018. Financing of the first phase is valued at RUB 77 bln (including invested RUB 20 bln), the second phase (2018-22) – RUB 42 bln, the third phase (2022-24) – RUB 26.5 bln.
Upon completion of the first phase, Zvezda will be able to build ice-class supply vessels, rescue ships, seismic survey ships, upper structures for platforms. Drilling ships, floating plants for storing and supply of hydrocarbons, offshore structures can be built when the second phase is completed. When fully operational, the shipbuilding complex can build large capacity ships and marine facilities of all conventional types and advanced concepts.
When speaking about the loading of Zvezda, Andrei Dutov gave the figures confirmed by the Ministry of Energy: current demand of oil and gas companies for such vessels and facilities is as high as 273 units with total value of over RUB trillion. The demand of Rosneft is valued at RUB 2.5 trillion (90 units), that of Gazprom – RUB 1.5 trillion (63 units), NOVATEK requires 59 vessels (no value announced), LUKOIL – RUB 200 bln (46 units), other companies – RUB 40 bln (15 units). Current backlog of orders at Zvezda numbers 59 units for RUB 2.5 trillion including 41 ships and 12 platforms for Rosneft under the company’s own investment programme.
Meanwhile, Kirill Stepanov, Deputy Minister for the Development of the Russian Far East, who also participated in the meeting, said the demand for products of Zvezda is estimated at 538 vessels by 2030.
To make the project economically viable, RF Ministry of Industry and Trade suggests that RF Government Decree bans ordering ships from foreign shipyards if such ships required under large scale investment projects can be built in Russia. Drafting of RF Government Decree is nearing completion.
“In our opinion, this measure will let consolidate the orders at Shipbuilding Complex Zvezda and ensure the return on investments,” Andrei Dutov comments.
According to Kirill Stepanov, this scope of works will require facilities for localization of equipment and materials production. The Ministry says some 60% of components have to be imported today. The official believes the required production facilities could be located close to the shipbuilding complex within the Free Port of Vladivostok so that investors could enjoy its advantages.
The above support measure look quite natural considering the state’s direct allocations and investments of state-owned companies into SC Zvezda project. But the United Shipbuilding Corporation seems to be forgotten though it numbers tens of companies requiring orders and has its own project on construction of large capacity ships.
As USC President Aleksei Rakhmanov told at the Marine Board meeting, an agreement with Rosneft was reached when Zvezda project was handed over to the consortium of investors. According to it, other shipyards of the Far Eastern Shipbuilding and Ship Repair Center (Khabarovsk and Amur shipyards) should be awarded with the oil company’s orders. Yet, no orders have been placed by Rosneft at the above shipyards so far, USC President said.
Rosneft, in its turn, has been complaining over other oil companies’ sluggishness in signing contracts with Zvezda.
Besides, the investment programme of USC on the development of its shipyard Severnaya Verf (Saint-Petersburg) provides for construction of a dry dock to build vessels of up to 273 meters in length and up to 73 meters in breadth from 2017 (phase 1). Implementation of the programme’s phase 2 will let building 400-meter long vessels. The Corporation is also creating a so called ‘distributed shipyard’ at the shipbuilding facilities of Russia’s North-West region. The concept implies close cooperation of shipyards in execution of orders, including transportation of super-size units between them.
Thus, USC shipyards are likely to compete directly with Zvezda. This raises the question of whether all orders should be consolidated by Zvezda while USC is also a state corporation.
Rosneft and USC have overlapping interests not only in the Far East but also in the Murmansk region. Rosneft is creating a coastal supply base for its offshore projects at the facilities of the 82 Shiprepair Dockyard (JSC "82 SRZ", Roslykovo, Murmansk region), the shares of which were handed over to the oil company. To make up for it USC has to carry out reconstruction of dry dock facilities at Shipyard No 35. As long as it is not completed, 82 SRZ continues its operation. However, it became clear at the Marine Board meeting that synchronization of USC and Rosneft plans is a challenge.
The Board Chairman Dmitry Rogozin, Deputy Prime Minister of the Russian Federation, in his turn, called on forming a unified system of orders for all Russian shipyards, not only Zvezda complex. According to him, domestic competition between USC and Rosneft would be beneficial to the industry. It should be noted, though, that USC is a minority shareholder of SC Zvezda.
Anyway, both sides count the chickens before they are hatched as no one can predict the oil prices in 2018, or, especially in 2024. In this context, offshore projects with their high production costs can remain up in the air. We remember the fate of Shtokman, the project frozen in the period of higher energy prices.