Novatek increases LNG vessel order at the Hongxing shipyard to 17.
2019-06-17 09:00
Russian energy giant Novatek will increase the number of Arc7 ice-breaking LNG carriers ordered for its Arctic LNG 2 project, from the original 15 to a maximum of 17. These LNG carriers will be operated by the newly established China-Russia joint venture. It is reported that this large order for LNG carriers, totaling over US$2 billion, has already sparked fierce competition among Chinese and South Korean shipbuilders.
Russian media quoted Novatek CEO Leonid Mikhelson as saying: "We are conducting transshipment in Murmansk and Kamchatka, and now we need to decide on the issue of transporting LNG to these locations. Calculations show that we may need to build 15 to 17 ice-breaking LNG carriers for the Arctic LNG 2 project."
Mikhelson stated that these ice-breaking LNG carriers will be built by Zvezda Shipbuilding Complex, a subsidiary of the Far Eastern Shipbuilding and Ship Repair Center (FESRC), with delivery planned before 2025.
He revealed that the Russian government will "soon" decide to subsidize the difference between Zvezda Shipbuilding Complex's construction costs and the current market prices of overseas shipyards.
It is reported that these LNG carriers will be operated by the newly established joint venture, Maritime Arctic Transport LLC (MArT). On June 7, COSCO Shipping Group, Novatek, Russia's largest state-owned shipping company Sovcomflot, and Silk Road Fund Co., Ltd. signed an agreement to establish the joint venture Maritime Arctic Transport.
On April 5 this year, Sovcomflot ordered the first Arc7 ice-breaking LNG carrier for the Arctic LNG 2 project at Zvezda Shipbuilding Complex. Last December, Novatek had already signed a 25-year Contract of Affreightment (COA) with Sovcomflot for the first LNG carrier, stipulating that the new vessel must be delivered by the end of 2022 and undergo ice trials by April 2023.
The LNG carriers for the Arctic LNG 2 project will adopt an ice-breaking design, similar in specifications to the series of 15 ice-breaking LNG carriers built by Daewoo Shipbuilding for the Yamal LNG project. Daewoo Shipbuilding is also currently the only shipbuilding company globally with the technology and experience to build ice-breaking LNG carriers.
Previously, it was reported that Novatek had signed a provisional agreement with Zvezda Shipbuilding Complex and Sovcomflot for the construction and operation of an additional 4 Arc7 ice-breaking LNG carriers, with the formal contract expected to be reached this summer. These 4 ice-breaking LNG carriers are planned for delivery in 2025, with a total cost possibly reaching around US$2 billion. Zvezda Shipbuilding Complex will collaborate with South Korean shipbuilders to complete the construction of these 4 LNG carriers.
As Zvezda Shipbuilding Complex itself lacks experience in building and delivering LNG carriers and has not yet fully mastered ice-breaking LNG carrier construction technology, a significant portion of the work needs to be completed by overseas shipyards with advanced construction technology before being transported to Zvezda Shipbuilding Complex for subsequent stages. Reports indicate that Zvezda Shipbuilding Complex will select a technology partner before June this year.
Novatek's large LNG carrier order has sparked fierce competition among Chinese and South Korean shipbuilders. South Korean shipbuilders possess strong market competitiveness in building ice-breaking LNG carriers, and thus have high expectations for this order. However, leveraging their cooperative relationship with Russia and cost advantages, Chinese shipbuilders will also have the opportunity to participate in the competition and are expected to secure some orders.
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