Sergey Frank: Sovcomflot and Zvezda look into construction of Aframax tankers in the Primorye

Sergey Frank, President and CEO of Sovcomflot, shares his forecasts on tanker market development in 2016 and tells about shipbuilding programme of Sovcomflot in an exclusive interview with IAA PortNews during his working trip to Vladivostok.  

— What do you expect from the market of cargo shipping by tankers in 2016? 

— Tanker shipping market has been in a deep slump from 2009. The upward trend of freight rates emerged in late 2014. In 2015, spot rates in the segment of oil tankers surged by 50-100% depending on the type and size of vessels, in oil product segment – by 70%. Improvement of the market situation was driven, first of all, by a better supply/demand balance due to slowdown of global tanker fleet expansion amid the fall of crude oil prices, intensification of hydrocarbons trading worldwide as well as reduction of bunker prices.

Well balanced freight policy of Sovcomflot, efficient work of our analytical and commercial team let us take full advantage of the improved situation in the spot market. Meanwhile, we were consistently implementing our strategy aimed at expansion of our participation in long-term projects on transportation of LNG and servicing of offshore oil and gas production facilities. Thus, SCF Group ended the year of 2015 with a net profit of USD 354 million.  The past year has been the best for our company from 2008, one of the most successful periods in the history of tanker shipping. 
    
We are cautiously optimistic about the year of 2016. Preliminary results of SCF fleet operation in the first quarter of the year show that the company succeeds in keeping up the pace of 2015. There is a strong possibility that the market will show more volatility but we generally proceed from the assumption that supply/demand balance in the tanker segment will remain favorable for ship owners and keep freight rates at a good level. 

— Are there plans for introduction of amendments into Sovcomflot’s shipbuilding programme to place more orders with domestic shipyards?

— Sovcomflot has conventionally been among the largest customers of civil shipbuilding in Russia. Over recent years Sovcomflot has had 20 vessels for some USD 1.3 billion built at domestic shipyards. I’d like to emphasize that the construction was based exclusively on commercial terms. For many years we have been cooperating with the shipyards of Russia’s North-West Region – Admiralteiskie Verfi and Vyborg Shipyard (corporate members of USC) as well as Pella Shipyard. We are sure that Russian shipbuilding is able to deliver vessels of required quality. For example, solid expertise has been accumulated in our country when it comes to construction of ice class vessels including platform supply vessels. 

Sovcomflot is an industry-focused ship owner ordering fleet for specific projects, not for speculative reasons. So we know exactly when and which types of ships we need in the nearest future. As of today, our shipbuilding programme comprises 8 vessels with aggregate deadweight of some 234,000 t. Five of them are to be completed this year with the rest to be built next year. Among them we have icebreaking platform supply vessels for offshore Sakhalin projects, Arctic shuttle tankers for Novoportovskoye field and an icebreaking LNG carrier for Yamal-LNG project. 

Technological design of a vessel, its size and other characteristics normally depend on customers’ requirements. Many vessels’ specifications are determined by the projects. In most cases vessels have specific characteristics. They can operate in demanding climatic conditions. 

The procedures applied by our company make it impossible to order vessels from foreign shipyards without preliminary discussion of the issue with the shipyards of Russian shipbuilding cluster. With all other factors being equal, their proposals are a priority. Moreover, our engineering center is regularly monitoring the availability of free slots at Russian shipyards. 

- What place in SCF plans is given to Zvezda shipyard under construction in the Primorsky Territory?

From 2010, Sovcomflot has been developing different mechanisms of cooperation with the shipyard being built in the Primorye. Zvezda specialists are currently completing the development of the shipyard’s long-term product range. We have announced our demand for two types of vessels. First of all, it is a multi-purpose ice-class supply ship for oil and gas projects at Sakhalin and similar vessels for the Arctic projects. Secondly, it is a new generation of Aframax tankers allowing for a wide application of energy saving solutions during the operation. Sovcomflot is the largest operator of such vessels worldwide. Aframax tankers are the most demanded ships for Russia’s export of hydrocarbons. Besides, they are the best for many Russian terminals – those of Primorsk, Ust-Luga, Novorossiysk, CPC, Kozmino, Sakhalin-1 and Sakhalin-2 projects. 

Several days ago we held an operational meeting with Zvezda specialists and were informed on a possibility to have the first ship delivered to Sovcomflot in late 2019 – early 2020. 

The development of shipbuilding potential in the Primorye will contribute to its competitiveness in the field of shipbuilding and to creation of more opportunities for ship owners. This could be used as a basis for establishment of a competence center including our experience and programmes. It could serve the interests of both Sovcomflot and other Russian ship owners and oil & gas companies.

Interviewed by Yevgeny Pankratyev
Photo by Margarita Kuznetsova