Russia: Sovcomflot, Gazprom Sign Time Charter Agreement for Two New LNG Carriers

On 17 June 2011 at the St. Petersburg International Economic Forum, Sovcomflot – the largest operator of ice-class LNG tankers – signed a contract with Gazprom Global LNG Limited (GGLNG), a subsidiary of Gazprom, for the long-term time charter of two ultra-modern ice-class LNG-carriers. The long-term time charter provides for a minimum of 15 years’ employment for both vessels each of nearly 170,000 cubic meters cargo capacity.

Sovcomflot emerged as a winner from the selection process, organised by GGLNG, which involved the world’s leading LNG shipping companies. Simultaneously, SCF signed a shipbuilding contract with the South Korean shipyard STX Offshore & Shipbuilding (partner of OAO “USC” in Archtech Joint Venture), which will carry out the construction of the ships. The choice of shipyard was the result of a tender, held in accordance with SCF Group’s existing procedures for the conclusion of shipbuilding contracts. Delivery of the first vessel is scheduled for the fourth quarter of 2013, with the second vessel to follow in the second quarter of 2014.

USC and STX signed a protocol of intent involving a stage-by-stage preparation and subsequent start of production of LNG-carriers in Russia by 2015. At the Forum a trilateral strategic partnership agreement was also signed between Sovcomflot, Royal Dutch Shell and United Shipbuilding Corporation (USC). The agreement provides for co-operation between the parties on organising the construction of LNG vessels at Russian shipyards, incorporating the international expertise of Royal Dutch Shell and Sovcomflot.

Sovcomflot President & CEO Sergey Frank, said: “Developing SCF’s participation in LNG marine transportation and LNG technologies is one of the key elements of the Group’s strategy. We offered Gazprom Global LNG a competitive solution which will contribute to Gazprom’s development plans in the global LNG trade. In cooperation with USC and foreign partners we’ve developed a truly innovative solution, incorporating a unique and technically advanced ship design, which can be utilized for future Russian LNG projects and which will allow us to engage the Russian shipbuilding industry. The contract is a logical extension of the close working partnership formed with Gazprom over the past few years, and of the cooperation agreement between us on LNG transportation, signed in June 2010.”

VP Shell Shipping, Grahaeme Henderson said: “We are delighted to be chosen to partner with Sovcomflot and United Shipbuilding Corporation to study the feasibility of LNG shipbuilding in Russia. Shell has a strong track record in the industry with over 45 years’ experience in LNG carrier design, construction and operation. Currently, we are involved in over 30% of all LNG trades worldwide and are building the world’s first floating LNG production facility. LNG will continue to play an increasingly important role in global energy markets, and we are excited by this unique opportunity to combine Shell’s track record in LNG with Russia’s extensive technical know-how in challenging Arctic conditions.”

Nikolai Grigoriev , Director of Global Shipping & Logistics, GGLNG added: “We are particularly delighted to have this opportunity to develop a long-term relationship with Sovcomflot, the world’s leading gas, oil and product tanker owner and operator based in Russia. Our partnership with Sovcomflot will not only provide GGLNG with high quality and competitive shipping services, but will also support the implementation of various strategic Russian content initiatives in shipbuilding and design, LNG expertise development, training and job generation in the Russian Federation.”

“An impressive series of agreements signed today involving the United Shipbuilding Corporation opens the door to the practical development of the Arctic offshore area – the oil&gas rich storage of the world, and above all, its Russian side “, – said USC President Roman Trotsenko. At the same time, – he stressed out – Partnership of the world oil&gas industry leaders consolidated today with participation of leading Russian shipyards and shipping companies will enable Russia to play a dominant role in the implementation of many high-tech projects of the starting development of the Arctic”.

The winning ship design for “Atlantic-max” type carriers (cargo capacity 170.000 cubic metres and tri-fuel diesel-electric propulsion), with ice2 class (Russian Maritime Register of Shipping) and winterisation enhancements, was the most sophisticated of those proposed. It incorporates all the latest requirements in terms of environmental protection, energy efficiency, crew accommodation and working conditions as well as vessel safety. The multi-functionality of this project is proven by the ability to operate the proposed ships between almost all existing LNG terminals, including the possibility to offer year-round gas exports from Russia’s first LNG project – Sakhalin-2, and in the future – from the Shtokman LNG project terminal.

Currently SCF fleet includes 6 LNG-tankers, carrying marine transportations for Sakhalin-2, Russia (operator Sakhalin Energy) and Tannguh, Indonesia (operator- BP), as well as LNG-transportations of “Gas Natural”, Spain. In June 2011 SCF Arctic LNG-carrier implemented a unique ship-to-ship transshipment operation on the project Escobar in Argentina.